UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
February 3, 2012
Commission file number: 1-10110
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
(Exact name of Registrant as specified in its charter)
BANK BILBAO
VIZCAYA ARGENTARIA, S.A.
(Translation of Registrant’s name into English)
Plaza de San Nicolás, 4
48005 Bilbao
Spain
(Address of principal executive offices)
Eduardo Ávila Zaragoza
Paseo de la Castellana, 81
28046 Madrid
Spain
Telephone number +34 91 537 7000
Fax number +34 91 537 6766
(Name, Telephone, E-mail and/or Facsimile
Number and Address of Company Contact Person)
Indicate by
check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form
20-F
x
Form 40-F
¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes
¨
No
x
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes
¨
No
x
BBVA
QUARTERLY REPORT
Results
2011
4Q11
BBVA
QUARTERLY REPORT
Results
2011
Contents
2 BBVA Group highlights
3 Group information
Relevant events 3
Earnings 6
Balance sheet and business activity 13
Capital base 17
Risk management 19
The BBVA share 21
Corporate responsibility 22
23 Business areas
Spain 25
Eurasia 31
Mexico 34
South America 38
The United States 42
Corporate Activities 46
Other information:
Wholesale Banking & Asset Management 49
BBVA Group
Highlights
BBVA Group highlights
(Consolidated figures)
31-12-11
D
% 31-12-10 31-12-09
Balance sheet (million euros)
Total assets 597,688 8.1 552,738 535,065
Customer lending (gross) 361,310 3.7 348,253 332,162
Customer funds on balance sheet 282,173 2.3 275,789 254,183
Other customer funds 144,291 (1.3) 146,188 135,632
Total customer funds 426,464 1.1 421,977 389,815
Total equity 40,058 6.9 37,475 30,763
Shareholders’ funds 40,952 11.6 36,689 29,362
Income statement (million euros)
Net interest income 13,160 (1.2) 13,320 13,882
Gross income 20,566 (1.6) 20,910 20,666
Operating income 10,615 (11.1) 11,942 12,308
Income before tax 3,770 (41.3) 6,422 5,736
Net attributable profit 3,004 (34.8) 4,606 4,210
Net attributable profit excluding one-offs (1) 4,015 (12.8) 4,606 5,260
Data per share and share performance ratios
Share price (euros) 6.68 (11.6) 7.56 12.73
Market
capitalization (million euros) 32,753 (3.5) 33,951 47,712
Net attributable profit per share (euros) 0.64
(44.1) 1.14 1.07
Net attributable profit per share excluding one-offs (euros) (1) 0.85 (25.5) 1.14 1.33
Book value per share (euros) 8.35 2.2 8.17 7.83
P/BV (Price/Book value; times) 0.8 0.9 1.6
PER (Price/Earnings; times) 10.9 7.4 11.3
Yield
(Dividend/Price; %) 6.3 5.6 3.3
Significant ratios (%)
ROE (Net attributable profit/Average equity) 8.0 15.8 16.0
ROE excluding one-offs (1) 10.6 15.8 20.0
ROA (Net income/Average total assets) 0.61 0.89 0.85
ROA excluding one-offs (1) 0.79 0.89 1.04
RORWA
(Net income/Average risk-weighted assets) 1.08 1.64 1.56
RORWA excluding one-offs (1) 1.40 1.64 1.92
Efficiency ratio 48.4 42.9 40.4
Risk premium 1.20 1.33 1.54
NPA ratio 4.0 4.1 4.3
NPA coverage ratio 61 62 57
Capital adequacy ratios (%)
Core capital 10.3 9.6
8.0
Tier I 10.3 10.5 9.4
BIS Ratio 12.9 13.7 13.6
Other information
Number of shares (millions) 4,903 9.2 4,491 3,748
Number of shareholders 987,277 3.6 952,618 884,373
Number of employees (2) 110,645 3.4 106,976 103,721
Number of branches (2) 7,457 1.3 7,361 7,466
Number of ATMs (2) 18,794 10.2 17,055 15,716
General note: These quarterly statements have not been audited. The consolidated accounts of the BBVA Group have been
drawn up according to the International Financial Reporting Standards (IFRS) adopted by the European Union and in conformity with Bank of Spain Circular 4/2004, together with the changes introduced therein.
(1) In the fourth quarter of 2011 a charge was booked for goodwill impairment in the United States. The third quarter of
2009 includes capital gains from the sale-and-leaseback of retail branches which have been allocated to generic provisions for NPA, with no effect on net attributable profit, and in the fourth quarter of 2009, there was a charge for extraordinary
provisions and a charge for goodwill impairment in the United States.
(2) Excluding Garanti.
2 BBVA Group Highlights
Group
information
Relevant events
In the fourth quarter of 2011 BBVA confirmed the main trends identified over the year and since the start of the crisis: recurring earnings, stability of the indicators of credit quality,
organic capital generation, and prudent liquidity management. This standout performance is due to BBVA’s approach to banking based on four pillars: a business model focused on a long-term and lasting relationship with its customer base;
management based on prudence and anticipation; a corporate governance framework underpinned by principles of integrity, prudence and transparency; and finally, an appropriate diversification in terms of geographical areas, businesses and customers.
In terms of earnings generation, the main points to highlight over the quarter are as follows:
A continued upward trend in earnings of a more recurring nature (i.e. gross income excluding NTI or dividends). These
represent most of the Group’s gross income, thanks to the positive performance of net interest income, income by the equity method and the insurance business.
Other income also performed well. Dividends include those from Telefónica, while net trading income (NTI) has recovered from its low contribution in the third quarter.
Operating expenses were up due to the Group’s investment program. Despite this, the efficiency ratio closed December
at 48.4%, one of the best among the Bank’s peers.
Impairment losses on financial assets were up,
basically due to increased loan loss provisions, in line with higher revenue over the quarter.
There was
goodwill impairment in the United States of €1,011m after tax. This is an accounting entry that does not negatively affect the Group’s liquidity or solvency. It reflects the lower growth prospects of the economy and banking business in the
country. Given its one-off nature, comments on the accounts will be made excluding this effect where possible.
The net attributable profit, excluding the one-off mentioned above, was €872m, up on the €804m for the previous
quarter. The total for the year as a whole was €4,015m.
The Group has maintained its main asset quality
indicators stable for yet another quarter (the eighth since December 2009). The NPA ratio closed 30-Dec-2011 at 4.0% and the coverage ratio at 61%. There were improvements in the indicators in the United States and South America, while in Spain and
Mexico they remain stable.
There is also a notable capacity to generate organic capital. This is one of the
pillars underpinning compliance with the capital recommendations set by the European Banking Authority (EBA). The EBA has set a capital recommendations for the main European banks, with a minimum core capital ratio of 9% (under the special criteria
defined by the EBA), and an additional exceptional, temporary buffer to cover sovereign risk exposure. EBA’s aim is to restore market confidence with respect to the solvency of the European financial institutions. In the case of BBVA, the final
figure, which takes the September 2011 figures as a base, is €6.3 billion, of which €2.3 billion is allocated for the sovereign buffer. The time limit for compliance with this exceptional capital recommendation is June 30, 2012. The
Group bases its strategy for compliance on the following pillars:
Quarter-by-quarter organic capital
generation. Since December 2007, the Group has generated a quarterly average of around 20 basis points.
Management of capital instruments, such as the successful exchange of preference shares for mandatory convertible bonds,
which are 100% eligible as core capital. The exchange among investors has had a subscription rate of 98.7%, amounting to a total of €3.4 billion. This operation also demonstrates the high level of capillarity of BBVA’s network and the
confidence that customers have in the Bank.
To a lesser extent, compliance with the planned timetable for
implementing the internal models approved at the time by the Bank of Spain.
As explained in the section on the
capital base in this report, as of December 31, 2011 84% of the recommendation had already been met. In the first half of 2012, the Group’s organic generation of capital will cover the remaining amount. This will allow it to meet with ease the
core Tier 1 ratio (under EBA criteria) of 9% by June 2012.
As customary, on 10-Jan-2012 the Bank paid an
interim dividend against 2011 results of €0.10 per share. It had been approved by the BBVA Board of Directors on December 20.
Making use of the new lending facility provided by the European Central Bank (ECB), BBVA took up €11,000m at the extraordinary 36-month auction on December 21. This figure is
equivalent to the sum of its wholesale debt redemptions for 2012. It means that the
Relevant events 3
Group has
“liquidity coverage” and demonstrates its prudence in liquidity risk management in line with the profile of maturities in upcoming years. However, it does not imply that the Group will not issue debt in 2012 if conditions improve.
The most important aspects of the business areas are summed up below:
Spain continues to be immersed in a process of financial deleveraging, which is necessary and positive for the
country’s economy. This, combined with the positive development in customer funds on balance sheet (including promissory notes and excluding repos and other balances related to Markets), this is having a positive impact on the liquidity gap in
the area. From the point of view of earnings, net interest income has shown a notable resilience, thanks to the defense of spreads and the strict control of operating expenses. The area generated a profit of €202m for the quarter, and
€1,363m for the year as a whole. In terms of asset quality, the NPA ratio and coverage ratio remain stable and compare very favorably with those in the system as a whole.
In Eurasia the contribution from Garanti was highly positive. According to September data, it has become the most profitable bank in Turkey. The stake in the Chinese bank CNCB also made a
favorable contribution. The profit for the quarter was €322m and for the year as a whole €1,027m. As a percentage of the total, this already accounts for 25.6% of the Group’s earnings excluding one-offs, and thus provides a
significant level of geographical diversification. It is a reflection of the Group’s commitment to emerging countries with economic growth potential.
Mexico posted solid results in 2011 that set it apart from its main competitors. This is mainly the result of the positive performance of gross income, which was up 4.3% year-on-year at
constant exchange rates. The improvement was due to a greater volume of business, good price management and the positive performance of the insurance business. The good performance of revenue has allowed the significant investment undertaken in
innovation, technology and infrastructure to continue. This takes advantage of the opportunities offered by the Mexican market and maintains the Bank as one of the most efficient in the local banking sector, with an efficiency ratio of 36.2%. In
addition, growth in lending volume has been accompanied by good risk management, with the result that the cumulative risk premium improved by 36 basis points over the year to 3.29%. Thus the net attributable profit for 2011 was €1,741m, 5.4%
more than in 2010 at constant exchange rates.
South America continues with its positive performance thanks to
significant improvement in business activity. Also worth noting are the excellent price management, positive performance of income from fees and commissions (despite regulatory limitations), and the rigorous policy of risk admission, which has led
to a clear improvement in asset quality. As a result, the area was able to make further progress with its growth plans and provided a net attributable profit in 2011 of €1,007m, a year-on-year increase of 16.2% at constant exchange rates.
In the United States there was a renewed improvement in the loan-book mix, with a further increase in the
weight of target portfolios; and in the mix of customer funds, where the share of lower-cost funds continues to increase. The changes in the loan-book mix has had a clear impact on asset quality in the area, with the NPA ratio and coverage ratio
improving on the figures for the previous quarter. In terms of earnings, net interest income was resilient and loan-loss provisions declined. This explains why the net attributable profit for 2011, excluding goodwill impairment, was 23.2% up on the
2010 figure at €289m.
The economic background
In the fourth quarter of 2011, the global economy once more combined fairly solid growth at a global level, particularly
with the boost from emerging economies (though with signs of a slowdown), with a high level of tension on the financial markets as a result of the lack of resolution to the public debt crisis in Europe.
By regions, financial tension increased in Europe and has even extended to core countries. The response to this new wave
of tension has been only partly effective. The ECB has reversed the interest-rate rises begun at the start of 2011, and at the same time implemented new measures to support long-term liquidity in the financial system. However, it has not shown
greater commitment to direct intervention in the sovereign bond markets, beyond the current program, which was particularly active over the quarter for Spanish and Italian debt. On the question of governance, the agreements reached at the European
summit on December 8 and 9 have been a step in the right direction, in particular with respect to greater vigilance of private and public imbalances in the euro
Interest rates
(Quarterly averages)
2011 2010
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
Official ECB rate 1.28
1.50 1.25 1.00 1.00 1.00 1.00 1.00
Euribor 3 months 1.49 1.54 1.44 1.10 1.02 0.87 0.69 0.66
Euribor 1 year 2.05 2.00 2.13 1.74 1.52 1.40 1.25 1.22
USA Federal rates 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
TIIE (Mexico) 4.80 4.81 4.85 4.85 4.87 4.91 4.94 4.92
4 Group information
zone.
Nevertheless, there has still not been any substantial progress towards fiscal union or on the question of Eurobonds. Against this background, the European economy contracted slightly in the fourth quarter as a result of declining domestic demand
due to uncertainty and a weaker foreign sector. Growth in the Spanish economy was weak and the process of fiscal consolidation and a fragile labor market have not been offset by a very dynamic foreign sector.
The outlook worsened in the United States over the year, although the likelihood of renewed recession, which appeared
strong in the summer, has partially cleared. Published figures give a somewhat more positive note, with growth gathering pace slightly, though it has still not reached a sufficiently solid level. Concerns also remain about the state of the public
finances and the necessary process of fiscal consolidation, which is still awaiting the outcome of negotiations in Congress for the details to be worked out.
Despite the slowdown in advanced economies, emerging economies continue with a good pattern of growth towards more sustainable but robust levels, in particular supported by the strength of
domestic demand. In Mexico the economy is still growing solidly, despite some slowdown towards the end of 2011. Inflation is within the comfort zone. There are also clear signs of strength in South America, although the global slowdown has led to a
slight moderation in growth. Economic activity in China also moved towards a soft landing in the fourth quarter. Domestic demand remains relatively robust, but the reduced dynamism at a global level has had some negative impact on the country’s
exports. As a result of the measures adopted to prevent the economy from overheating, inflation is moderating and closed the year at around the government target. This has led to a pause in the cycle of interest-rate rises and the first signs of a
more accommodative monetary policy. Finally, Turkey has been more exposed to phases of financial contagion from Europe, with a lower rate of capital in inflows, falls in equity markets and a loss of value of the lira, forcing the Central Bank to
intervene. Economic activity felt the impact towards the end of 2011, but it is still fairly buoyant.
With
respect to exchange rates, there was general appreciation over the quarter on the final rates of currencies with the biggest influence on the Group’s financial statements. In terms of average exchange rates, the Mexican, Chilean and Colombian
pesos depreciated slightly. In year-on-year terms, the final rate of the Mexican peso depreciated, as to a lesser extent did the Chilean and Argentinean pesos. In contrast, there was a year-on-year appreciation in the dollar fixing rate (though a
depreciation in average rates), as there was with the rest of the key Latin American currencies. To sum up, the impact over the quarter of currencies is positive on both the balance sheet and on business and earnings. In contrast, the effect is
negative in the year-on-year comparison.
Exchange rates
(Expressed in currency/euro)
Year-end exchange rates Average exchange rates
31-12-11
D
% on 31-12-10
D
% on
30-09-11 2011
D
% on 2010
Mexican peso 18.0512 (8.3) 3.0 17.2906
(3.2)
U.S. dollar 1.2939 3.3 4.4 1.3916 (4.7)
Argentinean peso 5.5679 (1.5) 2.0 5.7467 (8.3)
Chilean peso 674.76 (7.3) 3.1 672.04 0.5
Colombian peso 2,512.56 1.8 2.8 2,570.69 (2.0)
Peruvian new sol 3.4890 7.6 7.3 3.8323 (2.3)
Venezuelan bolivar fuerte 5.5569 3.3 4.4 5.9765 (5.9)
Turkish lira 2.4432 (15.3) 2.7 2.3383 (14.6)
Chinese yuan 8.1588 8.1 5.7 8.9932 (0.2)
Relevant
events 5
Earnings
The BBVA Group’s income statement for the fourth quarter of 2011 has a significantly high level of
revenue, which has allowed for a higher effort in loan-loss provisions. The most significant aspects of the statement are detailed below:
The continuing upward trend in the most recurring revenue, i.e. gross income excluding NTI and dividends:
- Net interest income has risen for the fourth quarter in a row thanks to the increased business activity in emerging countries and appropriate price management carried out in all
geographical areas.
Net attributable profit
(Million euros)
-12.8% (1)
4,606 4,015
1,240 1,287 1,140 939
1,150 1,189 804 872 (2)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate: -11.3%.
(2)
Excluding results of one-off operations.
Consolidated income statement: quarterly evolution
(Million euros)
2011 2010
4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q
Net interest income 3,485 3,286 3,215 3,175 3,138 3,245 3,551 3,386
Net fees and commissions 1,136 1,143 1,167 1,114 1,135 1,130 1,166 1,106
Net trading income 416 (25) 336 752 252 519 490 633
Dividend income 230 50 259 23 227 45 231 25
Income by the equity method 207 150 123 121 124 60 94 57
Other operating income and expenses 42 22 62 79 70 85 47 93
Gross income 5,515 4,627 5,162 5,263 4,946 5,084 5,579 5,301
Operating costs (2,652) (2,461) (2,479) (2,359) (2,325) (2,262) (2,262) (2,118)
Personnel expenses (1,404) (1,325) (1,306) (1,276) (1,240) (1,211) (1,215) (1,149)
General and administrative expenses (1,021) (920) (964) (887) (887) (855) (855) (796)
Depreciation and amortization (227) (216) (208) (196) (199) (197) (192) (174)
Operating income 2,863 2,166 2,683 2,904 2,621 2,821 3,317 3,183
Impairment on financial assets (net) (1,337) (904) (962) (1,023) (1,112) (1,187) (1,341) (1,078)
Provisions (net) (182) (94) (83) (150) (75) (138) (99) (170)
Other gains (losses) (1,718) (166) (154) (71) (273) 113 (88) (72)
Income before tax (375) 1,002 1,484 1,659 1,162 1,609 1,789 1,862
Income tax 368 (95) (189) (369) (127) (359) (431) (510)
Net income (7) 907 1,295 1,290 1,034 1,250 1,358 1,352
Non-controlling interests (132) (103) (106) (141) (96) (110) (70) (113)
Net attributable profit (139) 804 1,189 1,150 939 1,140 1,287 1,240
Net one-offs (1) (1,011) - - - - - - -
Net
attributable profit (excluding one-offs) 872 804 1,189 1,150 939 1,140 1,287 1,240
Basic earnings per share
(euros) (0.03) 0.17 0.25 0.24 0.22 0.28 0.31 0.30
Basic earnings per share excluding one-offs (euros) (1) 0.18
0.17 0.25 0.24 0.22 0.28 0.31 0.30
(1) In the fourth quarter of 2011 a charge was booked for goodwill
impairment in the United States.
6 Group information
Consolidated income statement
(Million euros)
2011
D
%
D
% at constant exchange rates 2010
Net interest income 13,160 (1.2) 1.0 13,320
Net
fees and commissions 4,560 0.5 2.6 4,537
Net trading income 1,479 (21.9) (20.4) 1,894
Dividend income 562 6.3 6.7 529
Income by the equity method 600 79.2 79.3 335
Other operating income and expenses 205 (30.6) (32.7) 295
Gross income 20,566 (1.6) 0.3 20,910
Operating costs (9,951) 11.0 13.3 (8,967)
Personnel expenses (5,311) 10.3 12.4 (4,814)
General and administrative expenses (3,793) 11.8 14.5 (3,392)
Depreciation and amortization (847) 11.3 13.9 (761)
Operating income 10,615 (11.1) (9.5) 11,942
Impairment on financial assets (net) (4,226) (10.4) (8.7) (4,718)
Provisions (net) (510) 5.7 6.6 (482)
Other gains
(losses) (2,109) n.m. n.m. (320)
Income before tax 3,770 (41.3) (40.1) 6,422
Income tax (285) (80.1) (79.6) (1,427)
Net income 3,485 (30.2) (28.9) 4,995
Non-controlling interests (481) 23.8 27.8 (389)
Net attributable profit 3,004 (34.8) (33.7) 4,606
Net one-offs (1) (1,011) n.m. n.m. -
Net attributable profit (excluding one-offs) 4,015 (12.8) (11.3) 4,606
Basic earnings per share (euros) 0.64 (44.1) 1.14
Basic earnings per share excluding one-offs (euros) (1) 0.85 (25.5) 1.14
(1) In the fourth quarter of 2011 a charge was booked for goodwill impairment in the United States.
- Income from fees and commissions were stable, despite the regulatory limitations in force in some areas, lower activity
in Spain and greater efforts to maintain customer loyalty.
- Equity-accounted income was up considerably
boosted by the contribution from CNBC.
There was also a significant contribution from NTI after a particularly
low third quarter, and from dividends, which include the payment from the stake in Telefónica.
Impairment losses on financial assets were up over the quarter, basically due to the increase of the Group’s
loan-loss provisions, which took advantage of the higher revenue. Nonetheless, the figure for the year as a whole is 10.4% down on 2010.
There was an adjustment to the value of goodwill in the United States of €1,011m after tax. Despite the positive performance of the franchise in 2011, the slower-than-expected
economic recovery and low interest rates outlook, combined with growing regulatory pressure, all imply a slowdown in forecast earnings growth in this area. This adjustment is of an accounting nature only and does not have any negative consequence on
the Group’s liquidity or capital adequacy.
The net attributable profit before applying the goodwill
impairment was €872m in the fourth quarter and €4,015m for the year as a whole. Including the adjustment, the Group’s net attributable profit for 2011 came to €3,004m.
Net interest income
The Group’s net interest income in the fourth quarter of 2011 rose again for the fourth quarter in a row to €3,485m, 6.0% up on the previous quarter and 11.0% up on the figure
for the
Earnings
7
same
period the previous year. Net interest income has reached its highest level since June 2010, before the cost of funds rose in Spain. The result has been boosted by a number of factors: the increased volume of business in emerging countries, the
contribution from Garanti (bigger in this quarter and non-existent 12 months previously) and appropriate spread management. Over the year as a whole, the net interest income amounted to €13,160m, barely 1.2% below the figure for 2010, but 1.0%
above it excluding the impact of the exchange rate.
The defense of spreads within the Group can be seen in all
the geographical areas. In the euro zone resident sector, yield on loans
Net interest income Customer spread.
Euros domestic sector
(Million euros) (Percentage)
-1.2% (1) 3.85 3.86
13,320 13,160 3.48 3.60
3,551 Yield on total 3.31
3,386 3,286 3,485 net lending
3,245 3,138 3,175 3,215
Customer
spread 2.10 2.11
1.77 1.76 1.80
Cost of
deposits
1.73 1.80 1.75 1.75
1.53
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2010 2011
(1) At constant exchange
rate: +1.0%.
Breakdown of yields and costs
4Q11 3Q11 2Q11 1Q11
% of ATA
% yield/Cost
% of ATA
% yield/Cost
% of ATA
% yield/Cost
% of ATA
% yield/Cost
Cash and balances with central banks 3.9 0.99 3.8 1.19 3.6 1.25 3.7 1.30
Financial assets and derivatives 25.6 3.08 25.4 2.87 24.3 2.98 24.4 3.03
Loans and advances to credit institutions 4.3 2.24 4.4 2.88 5.3 2.35 4.5 2.23
Loans and advances to customers 59.3 5.76 59.7 5.62 60.3 5.42 61.2 5.24
Euros 37.2 3.54 38.4 3.50 39.2 3.31 40.0 3.25
Domestic 32.5 3.86 33.1 3.85 34.0 3.60 35.4 3.48
Other 4.8 1.39 5.2 1.31 5.2 1.41 4.6 1.43
Foreign currencies 22.1 9.48 21.3 9.44 21.1 9.33 21.3 8.98
Other assets 6.9 1.00 6.7 0.45 6.4 0.37 6.1 0.44
Total assets 100.0 4.41 100.0 4.29 100.0 4.19 100.0 4.12
Deposits from central banks and credit institutions 15.0 2.60 14.3 2.73 13.7 2.52 11.3 2.68
Deposits from customers 47.3 2.16 48.3 2.17 48.6 2.06 50.6 1.77
Euros 26.1 1.60 27.3 1.72 26.6 1.64 28.1 1.35
Domestic 15.9 1.75 16.6 1.75 17.7 1.80 17.7 1.73
Other 10.2 1.36 10.7 1.67 8.9 1.31 10.5 0.72
Foreign currencies 21.2 2.86 21.0 2.75 22.1 2.57 22.4 2.28
Debt certificates and subordinated liabilities 18.1 2.63 18.9 2.47 20.3 2.27 20.1 2.15
Other liabilities 12.8 1.14 11.7 0.99 10.7 1.02 11.1 1.29
Equity 6.8 - 6.8 - 6.7 - 6.9 -
Total liabilities
and equity 100.0 2.04 100.0 2.02 100.0 1.92 100.0 1.77
Net interest income/Average total assets (ATA) 2.37
2.27 2.27 2.35
8
Group information
once more
rose by 1 basis point in the fourth quarter and closed the year at 3.86%. This is due to the gradual repricing of the loan portfolio and the positive spreads in new loans. Cost of deposits remains at 1.75%. As a result, customer spreads continued to
increase from 2.10% in the third quarter to 2.11% at the close of 2011.
In Mexico, interbank rates remained
practically at the same levels throughout 2011. However, the yield on loans once more increased by 18 basis points over the quarter to 13.28%, thanks to the good new production figures, mainly in consumer finance and credit cards. Cost of deposits
fell by 13 basis points over the same period to 1.84%. To sum up, the customer spread rose to 11.45% (11.14% in the previous quarter) and the cumulative net interest income in the area was up 7.2% year-on-year at constant exchange rates, with
sustained growth each quarter.
The net interest income in South America continues to post high year-on-year
growth rates (up 31.6%, excluding the exchange-rate effect). This positive performance can be explained by the strength of business activity, together with excellent defense of spreads in the area.
Finally, the United States franchise continues to show a high resilience in net interest income in the quarter at constant
exchange rates. This is very significant, taking into account the gradual shift in composition of the loan portfolio toward lower-risk products with narrower spreads. This resilience is the result of an appropriate management of customer spreads.
Net interest income/ATA
BBVA Group (Percentage)
2.35 2.27 2.27 2.37
2.21
4Q 1Q 2Q 3Q 4Q
2010 2011
Gross income
In 2011, income from fees and commissions was very stable, with a year-on-year rise of just 0.5% to €4,560m. The figure is relevant given the environment in which it was achieved: the
regulatory limitations in force in some areas, lower activity in Spain and the reduction of some fees to ensure greater customer loyalty. It is worth pointing out that fees related to banking services improved most (up 1.3% year-on-year), while
those from the fund management business fell by 1.5% over the same period. This was due to the impact that developments in the markets had on assets under management and the preference shown by customers for other liability products such as time
deposits and promissory notes.
After a third quarter in which NTI was negative due to the loss of asset
values, reduced activity with customers and the lack of earnings from portfolio sales, NTI moved back into positive territory in the last quarter. This was the result of favorable interest rate hedging operations. For the year as a whole, NTI was
€1,479m, with a year-on-year fall of 21.9% due to its positive performance in 2010, above all in the first nine months.
Revenue from dividends, which basically includes BBVA’s stake in Telefónica (which is paid in May and November), was up 6.3% to €562m.
Income by the equity method was €600m (up 79.2% year-on-year), thus maintaining its good performance thanks to the
excellent results from CNCB.
The heading other operating income and expenses amounted to €205m in 2011, a
fall of 30.6% on the figure for 2010. The positive performance of the insurance business, where revenue was up by 12.7%, does not offset the increased allocations to deposit guarantee funds in the different geographical areas where BBVA operates, or
the effect of hyperinflation in Venezuela.
In short, and despite the difficult economic and financial
situation in 2011, recurring revenue has continued to rise since the third quarter of 2010. In 2011 as a whole its level was similar to the previous year. Gross income, excluding NTI and dividends, represents 90% of the Bank’s total revenue and
totaled €18,525m in 2011 (€18,487m in 2010 and 88% of all revenue last year). Including NTI and dividends, gross income
Earnings
9
Gross
income net of NTI and dividends
(Million euros)
+0.2% (1)
18,487 18,525
4,643 4,858 4,520 4,467 4,488 4,566
4,602 4,869
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate: +2.2%.
amounted to €20,566m, a year-on-year fall of 1.6%. However, this represents a rise of 0.3% excluding the
exchange-rate effect.
Operating income
Operating expenses in 2011 amounted to €9,951m, a year-on-year increase of 11.0%. The rise is due to the change in
perimeter (incorporation of Garanti), the investment process underway in BBVA, and the effort made in staff training to promote talent. BBVA has been recognized as the best European company
Gross income
(Million euros)
-1.6% (1)
20,910 20,566
5,301 5,579 5,084 4,946 5,263 5,162 4,627 5,515
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate: +0.3%.
Operating costs
(Million euros)
+11.0% (1)
8,967 9,951
2,118 2,262 2,262 2,325 2,359 2,479 2,461 2,652
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate: +13.3%.
Breakdown of operating costs and efficiency calculation
(Million euros)
2011
D
% 2010
Personnel expenses 5,311 10.3 4,814
Wages and
salaries 4,122 10.2 3,740
Employee welfare expenses 758 10.1 689
Training expenses and other 431 11.5 386
General and administrative expenses 3,793 11.8 3,392
Premises 849 13.2 750
IT 662 17.5 563
Communications 299 5.3 284
Advertising and publicity 378 9.6 345
Corporate
expenses 106 19.8 89
Other expenses 1,140 9.6 1,040
Levies and taxes 359 11.7 322
Administration costs 9,104 10.9 8,207
Depreciation and amortization 847 11.3 761
Operating costs 9,951 11.0 8,967
Gross income
20,566(1.6) 20,910
Efficiency ratio (Operating costs/Gross income, in %) 48.4 42.9
10 Group information
in
developing the leadership skills of its teams by Fortune magazine. Despite the increase in costs, the efficiency ratio closed December at an outstanding level of 48.4%, one of the lowest in the banking sector worldwide.
Efficiency
Efficiency ratio
(Million euros) (Percentage)
20,666 20,910 20,566
40.4 48.4 42.9
Gross income
Operating cost
8,358 8,967 9,951
2009 2010 2011 2009 2010 2011
As of 31-Dec-2011, the Bank employed 110,645 people, practically the same number as at the close of September,
with year-on-year growth of 3.4%. Its branch network numbered 7,457 units, with 21 additional branches than at the close of September, and 96 more than at the close of 2010. As has been the case recently, branches continue stable in Spain at a time
when the sector has just begun a process of reducing branch numbers. BBVA began the same process in 2006 and completed it over 2009. In contrast, the branch network in emerging countries is increasing (basically in Mexico and South America) as a
result of the expansion processes underway in these countries, aimed at taking advantage of the growth opportunities offered by their markets. Finally, the number of ATMs continues to grow. It closed December 2011 at 18,794, 602 more than in the
third quarter and 1,739 above the figure at the close of 2010. As is the case with branches, the increase is focused mainly in emerging countries, while developed countries show no significant changes, although in this case investment is focused on
their renewal and modernization.
To sum up, the changes mentioned above in revenue and expenses have resulted
in an operating income of €10,615m in 2011 (€11,942m in 2010).
Number of employees (1)
103,721 106,976 110,645
Spain 27,936 28,416 28,934
Mexico 32,580 34,082
35,950
South America
The United States 28,371 29,608 30,724
Rest of
the world 12,965 12,863 12,798
December 2009 December 2010 December 2011
(1) Excluding Garanti.
Number of ATMs (1)
15,716 17,055 18,794
Spain 4,916 5,138 5,283
Mexico
South America 6,237 6,760 7,710
The United States 3,629 4,079 4,682
934 1,078 1,1119
December 2009 December 2010
December 2011
(1) Excluding Garanti.
Number of branches (1)
7,466 7,361 7,457
Spain 3,055 3,024 3,016
Mexico
South America 1,987 1,985 1,999
The United States 1,495 1,456 1,567
Rest of the world 785 752 746
December 2009
December 2010 December 2011
(1) Excluding Garanti.
Operating income
(Million euros)
-11.1% (1)
11,942 10,615
3,183 3,317 2,821 2,621
2,904 2,683 2,166 2,863
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate:
-9.5%.
Earnings 11
Provisions
and others
Impairment losses on financial assets amounted to €4,226m in 2011, a fall of 10.4% on the
figure for the previous year. In the fourth quarter there was an increase in the level of the Group’s generic loan-loss provisions, aimed at taking advantage of the higher revenue over the last three months of the year. This has had a positive
impact on BBVA’s coverage ratio, which closed 31-Dec-2011 at 61%. Another important point is that the Bank’s cumulative risk premium has improved 14 basis points along the year, closing 2011 at 1.20%.
Impairment losses on financial assets
(Million euros)
-10.4% (1)
4,718 4,226
1,078 1,341 1,187 1,112 1,023 962 904 1,337
1Q 2Q
3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At constant exchange rate: -8.7%.
Provisions amounted to €510m in 2011, 5.7% up on the figure for the previous year. They basically cover early
retirement, other allocations to pension funds and transfers to provisions for contingent liabilities.
The
heading other gains (losses) reported a negative €2,109m in 2011. This can be explained almost entirely by two concepts: a negative €665m corresponding to provisions made for real estate and foreclosed assets with the aim of maintaining
coverage above 30%; and a negative €1,444m for goodwill impairment in the United States. In 2010 the figure was a negative €320m, mainly from the adjustment of the value of foreclosed or acquired assets in Spain.
In general, the 2011 corporate tax rate was low due to revenue with a low or no tax rate (mainly dividends and income by
the equity method) and the growing weight of earnings from the Mexico, South America and Turkey, where effective tax rates are low.
Net attributable profit
In the difficult economic
scenario described above, BBVA generated a net attributable profit of €3,004m. Excluding the one-off charge due to goodwill impairment in the United States, the figure is €4,015m.
By business areas, Spain generated €1,363m, Eurasia €1,027m, Mexico €1,741m, South America €1,007m and
the United States a loss of €722m (a gain of €289m excluding the goodwill impairment).
The
cumulative earnings per share (EPS) for the year were €0.64 (€0.85 excluding one-offs), compared with €1.14 in 2010, after adjusting for the effects of the capital increase in November 2010, April 2011 and October 2011. The increase
in the Group’s capital has moved the book value per share up by 2.2% year-on-year to €8.35. ROE excluding one-offs stood at 10.6% (8.0% with one-offs) and return on total average assets (ROA) at 0.79% (0.61% with one-offs). These ratios
keep BBVA as one of the most profitable banks in its peer group.
Earnings per share (1)
(Euros)
-25.5%
1.14 0.85 0.30 0.31
0.28 0.24 0.25 0.22
0.18
0.17
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) Excluding results of one-off
operations.
ROE (1)
(Percentage)
20.0 15.8 10.6
2009 2010 2011
(1) Excluding results of one-off operations.
ROA
(1)
(Percentage)
1.04 0.89 0.79
2009 2010 2011
(1) Excluding results of one-off operations.
12 Group information
Balance
sheet and business activity
BBVA closed the fourth quarter of 2011 with a balance sheet that continues to
reflect great stability, prudent risk management, great soundness, low leverage and reduced funding needs.
In
terms of stability, the Group’s total assets as of 31-Dec-2011 were €598 billion, 2.3% above the figure for the previous quarter.
As in previous quarters, the loan book continues with its twofold performance by geographical area, and the reduction in the most problematic real-estate portfolios in Spain and the United
States. In Spain, gross lending to customers fell as a result of the deleveraging process in the country’s economy. Despite this, BBVA gained market share in the residential mortgage
Consolidated balance sheet
(Million euros)
31-12-11
D
% 31-12-10 30-09-11
Cash and balances with central banks 30,939 54.8
19,981 24,637
Financial assets held for trading 70,602 11.6 63,283 74,860
Other financial assets designated at fair value through profit or loss 2,977 7.3 2,774 2,825
Available-for-sale financial assets 58,143 3.0 56,457 58,768
Loans and receivables 381,077 4.5 364,707 369,919
Loans and advances to credit institutions 26,107 10.5 23,636 23,756
Loans and advances to customers 351,900 3.8 338,857 343,416
Other 3,069 38.7 2,213 2,747
Held-to-maturity
investments 10,955 10.1 9,946 11,049
Investments in entities accounted for using the equity method 5,843 28.5
4,547 5,352
Tangible assets 7,330 9.4 6,701 7,026
Intangible assets 8,677 8.4 8,007 10,068
Other assets 21,145 29.4 16,336 19,935
Total
assets 597,688 8.1 552,738 584,438
Financial liabilities held for trading 51,303 37.9 37,212 50,616
Other financial liabilities at fair value through profit or loss 1,825 13.6 1,607 1,716
Financial liabilities at amortized cost 479,904 5.9 453,164 468,494
Deposits from central banks and credit institutions 92,503 35.7 68,180 80,072
Deposits from customers 282,173 2.3 275,789 282,050
Debt certificates 81,930 (3.8) 85,180 83,107
Mortgage bonds and covered bonds 42,096 4.6 40,246 44,263
Other debt certificates 39,834 (11.3) 44,933 38,844
Subordinated liabilities 15,419 (11.5) 17,420 16,067
Other financial liabilities 7,879 19.4 6,596 7,198
Liabilities under insurance contracts 7,737 (3.7) 8,033 7,478
Other liabilities 16,861 10.6 15,246 16,265
Total liabilities 557,630 8.2 515,262 544,569
Non-controlling interests 1,893 21.7 1,556 1,730
Valuation adjustments (2,787) 262.0 (770) (3,414)
Shareholders’ funds 40,952 11.6 36,689 41,552
Total equity 40,058 6.9 37,475 39,868
Total equity and liabilities 597,688 8.1 552,738 584,438
Memorandum item:
Contingent liabilities 39,904
9.5 36,441 38,530
Balance sheet and business activity 13
portfolio
and further reduced its exposure to the developer sector. In Europe, lending remains stable and focused on high added value customers, mainly corporate clients. Lending in Garanti continues to grow, above all in consumer loans. The United States is
still making progress in shifting its portfolio mix by increasing the weight of target portfolios (residential and commercial real estate). Finally in Latin America, a region where lending is clearly buoyant, there was a notable increase in lending
in practically all the portfolios and categories. Moreover, these rises were of greater quality as a consequence of the significant proportion of bundled customers.
The more stable lower-cost on-balance sheet customer funds (current and saving accounts) performed particularly well. As a result, their weight on the liabilities side of the balance sheet
has increased, thus allowing the Group to continue to improve its funding structure.
In on-balance-sheet
funds, there has been a reduction of assets under management due to the market turmoil combined with customer preference for other liability products, such as time deposits and promissory notes. Nevertheless, BBVA maintains its leading position in
Spain in mutual funds, with a fall that is below the average for the system, thanks to the greater weight of guaranteed funds. Additionally, the Group has clear leadership positions in pension funds, both in Spain and Latin America, where it is
considered a model.
Loans and advances to customers
Gross customer lending closed December 2011 at €361 billion. This represents a rise over the year of 3.7% (up 4.3% at
constant exchange rates) and of 2.5% in the quarter.
By business areas, Mexico has performed well, with a
year-on-year growth of 8.1% at constant exchange rates (up 9.3% excluding the old mortgage portfolio). This positive performance was basically due to the increase in the retail portfolio, mainly consumer finance and credit cards, which together grew
by 23.6%. South America also continues to show a significant increase in lending, with a rise over the last
Customer lending
(Million euros)
31-12-11
D
% 31-12-10 30-09-11
Domestic sector 192,442 (3.1) 198,634 191,330
Public sector 25,509 7.8 23,656 26,096
Other domestic sectors 166,933 (4.6) 174,978 165,234
Secured loans 99,175 (5.5) 105,002 101,552
Commercial loans 6,620 (3.3) 6,847 5,918
Financial leases 4,955 (12.5) 5,666 5,151
Other term loans 41,863 (9.4) 46,225 42,043
Credit card debtors 1,616 (4.6) 1,695 1,542
Other demand and miscellaneous debtors 2,939 32.2 2,222 2,713
Other inancial assets 9,766 33.4 7,321 6,314
Non-domestic sector 153,222 14.1 134,258 145,614
Secured loans 60,655 33.3 45,509 58,202
Other
loans 92,567 4.3 88,750 87,413
Non-performing loans 15,647 1.9 15,361 15,689
Domestic sector 11,042 0.8 10,953 11,156
Public sector 130 16.5 111 133
Other domestic
sectors 10,913 0.7 10,841 11,024
Non-domestic sector 4,604 4.5 4,408 4,533
Customer lending (gross) 361,310 3.7 348,253 352,633
Loan-loss provisions (9,410) 0.1 (9,396) (9,217)
Customer lending (net) 351,900 3.8 338,857 343,416
14 Group information
Customer
lending (gross)
(Billion euros)
332 348 361
+3.7% (1)
December 2009 December 2010 December 2011
(1) At constant exchange rate: +4.3%.
twelve
months of 27.0% (also at constant exchange rates). In the United States, there was a notable increase in new production in the target portfolios (commercial and residential real estate), which led to a year-on-year increase of 21.5% in residential
real estate and 23.0% in corporate unsecured loans (these rates do not take into account the exchange-rate effect). Lending in Eurasia was up 43.1% thanks to the positive contribution from Garanti. In Spain lending fell back by 1.8%.
Within the domestic sector, the general tone is still weakness in new production. On the contrary, the non-domestic sector
continues to grow in practically all the categories, with a rate of change that is positive both over the quarter (up 5.2%) and for the last 12 months (up 14.1%).
Finally, NPL have remained stable since 2009.
Customer funds
Total customer funds amounted to €426 billion at the close of December 2011, with a slight increase of 1.1% over the year.
On-balance-sheet customer funds totaled €282 billion, a year-on-year increase of 2.3% (up 2.9% at constant exchange
rates). By categories, within the domestic sector, there was a notable increase in lower-cost deposits, such as current and savings accounts, which were up 2.3% year-on-year. Time deposits remained stable, thanks to the high percentage of renewals
of deposits gathered in 2010. These renewals were made at a significantly lower cost. However, over the quarter time deposits fell 4.1% as a result of the sale of €3,711m promissory notes by the retail network in Spain. These promissory notes
are included in the debt certificates heading. Finally, the lowest-cost customer funds in the non-domestic sector, i.e. current and savings accounts, increased notably.
Off-balance sheet customer funds amounted to €144 billion as of 31-Dec-2011, 1.3% down on the figure for the same date last year, but up 5.1% on
Customer funds
(Million euros)
31-12-11
D
% 31-12-10 30-09-11
Deposits from customers 282,173 2.3 275,789
282,050
Domestic sector 136,519 2.2 133,629 146,284
Public sector 28,302 62.5 17,412 30,672
Other domestic sectors 108,217(6.9) 116,217 115,612
Current and savings accounts 44,215 2.3 43,225 42,215
Time deposits 49,105 (0.1) 49,160 51,182
Assets sold under repurchase agreement and other 14,897(37.5) 23,832 22,215
Non-domestic sector 145,655 2.5 142,159 135,766
Current and savings accounts 85,204 14.1 74,681 78,127
Time deposits 53,399 (13.3) 61,626 54,958
Assets sold under repurchase agreement and other 7,051 20.5 5,852 2,681
Other customer funds 144,291 (1.3) 146,188 137,252
Mutual funds 39,294 (6.4) 41,991 38,874
Pension funds 78,648 (0.1) 78,763 74,118
Customer
portfolios 26,349 3.6 25,434 24,261
Total customer funds 426,464 1.1 421,977 419,302
Balance sheet and business activity 15
Customer
funds
(Billion euros)
422 426 +1.1% (1) 390 146 144 136 Other customer funds
Customer funds on balance sheet 254 276 282
December December December 2009 2010 2011
(1) At constant exchange rate: +2.5%.
the close
of the previous quarter. Of these funds, 35% (€50 billion) are located in Spain, a year-on-year fall of 4.0%, although the figure is practically the same as at the close of the third quarter. This can largely be explained by the reduction in
the value of the assets under management, mainly in mutual funds (down 12.2% year-on-year), and by customer preference for other savings products such as time deposits and promissory notes. It is worth pointing out that according to the latest data
from October 2011, the effect of this fall in BBVA is much less significant than in the rest of the system, given the more conservative profile of its mutual funds.
Pension funds totaled €17 billion (up 2.5% year-on-year and 2.9% quarter-on-quarter). BBVA has maintained its position as the leading pension fund manager in Spain, with a market
share of 18.7% (September 2011 data, the latest available).
In the rest of the world, off-balance-sheet
customer funds totaled €94 billion, with a year-on-year increase of 0.2% at current exchange rates. These were also affected by the fall in the value of assets under management.
Statement of changes in equity
BBVA’s equity as of 31-Dec-2011, after deducting the cash dividend payment for 2011 made on 10-Jan-2012, was €40,058m, a similar figure to that at the close of the third quarter
of the year.
Other customer funds
(Million euros)
31-12-11
D
% 31-12-10 30-09-11
Spain 50,399 (4.0) 52,482 50,225
Mutual funds 19,598 (12.2) 22,316 20,220
Pension funds 17,224 2.5 16,811 16,741
Individual
pension plans 9,930 2.9 9,647 9,600
Corporate pension funds 7,294 1.8 7,164 7,141
Customer portfolios 13,578 1.7 13,355 13,265
Rest of the world 93,892 0.2 93,707 87,027
Mutual
funds and investment companies 19,697 0.1 19,675 18,654
Pension funds 61,424 (0.9) 61,952 57,377
Customer portfolios 12,771 5.7 12,080 10,996
Other customer funds 144,291 (1.3) 146,188 137,252
16 Group information
Capital
base
In the fourth quarter of 2011, the most notable event with respect to the capital base was the
publication by the European Banking Authority (EBA) of the new capital recommendations applicable to certain financial institutions in Europe, aimed at recovering investor confidence in their solvency. These recommendations consist of a minimum core
capital ratio of 9% (using the specific criteria defined by the EBA), including an additional exceptional, temporary cushion for exposure to sovereign debt, which will have to be achieved by June 2012.
For the BBVA Group, the amount estimated at first in October using information from June 2011, was €7.1 billion. The
Group’s strategy to comply with this recommendation is based on the following fundamental pillars: organic generation of capital quarter by quarter; management of capital instruments; and, to a lesser extent, compliance with the forecast
timetable for implementing the internal models approved by the Bank of Spain. With data for the close of September, the figure fell to €6.3 billion, of which €2.3 billion correspond to sovereign exposure. The reduction on the original
figure was mainly the result of organic capital generation in the third quarter of 2011.
An additional
€5.3 billion were generated in the fourth quarter of the year, as follows:
There was a successful
completion of the exchange of preference shares for mandatory convertible bonds, which are 100% eligible as core capital. The exchange was subscribed by nearly all the investors, at 98.7% of the nominal amount, or a total of €3.4 billion.
A further €0.9 billion of capital was generated organically, explained basically by recurring earnings,
the current dividend policy, and the slight increase in lending.
There was a positive effect from the tax
benefit for goodwill impairment in the United States, which amounted to €0.4 billion.
The floor set by
the capital advanced measurement approach for operational risk was eliminated. This floor was established in December 2009 when the internal operational risk models for Spain and Mexico entered into force. The effect has been of an extra €0.6
billion.
Thus, 84% of the capital recommendation has been achieved as of December 31, 2011. In the first half
of 2012, the Group’s organic generation of capital will cover the remaining amount. This will allow BBVA to meet with ease the core Tier 1 ratio (according to EBA criteria) of 9% by June 2012.
Capital base (BIS II Regulation)
(Million euros)
31-12-11 30-09-11 30-06-11
31-03-11 31-12-10
Shareholders’ funds 40,952 41,552 38,677 38,107 36,689
Adjustments and deductions (10,222) (11,923) (11,904) (11,654) (8,592)
Mandatory convertible bonds 3,430 - 2,000 2,000 2,000
Core capital 34,161 29,628 28,773 28,452 30,097
Preference shares 1,759 5,157 5,114 5,128 5,164
Deductions (1,759) (2,733) (2,452) (2,367) (2,239)
Capital (Tier I) 34,161 32,053 31,435 31,214 33,023
Subordinated debt and other 11,258 11,800 12,266 12,613 12,140
Deductions (2,649) (2,733) (2,452) (2,367) (2,239)
Other eligible capital (Tier II) 8,609 9,067 9,814 10,246 9,901
Capital base 42,770 41,120 41,249 41,460 42,924
Minimum capital requirement (BIS II Regulation) 26,462 26,037 25,703 25,523 25,066
Capital surplus 16,308 15,083 15,547 15,937 17,858
Risk-weighted assets 330,771 325,458 321,282 319,044 313,327
BIS ratio (%) 12.9 12.6 12.8 13.0 13.7
Core capital (%) 10.3 9.1 9.0 8.9 9.6
Tier I (%)
10.3 9.8 9.8 9.8 10.5
Tier II (%) 2.6 2.8 3.1 3.2 3.2
Capital base 17
Status of
EBA capital recommendation at
December 2011 (Billion euros)
7.1 0.8
6.3 0.9
0.6
3.4
0.4
1.0
Capital Organic Capital Organic Floor Preference U.S. Capital recommendation generation recommendation generation
elimination in shares impairment recommendation at June 3Q11 at September 4Q11 AMA models exchange at December
As a result of the above, the capital base according to BIS II standards also substantially improved its quality over the
quarter and in the year as a whole. As of December 31, 2011, core capital stood at €34,161m, 15.3% up on the figure for September 2011 and 13.5% more than in December 2010. As a result, the core ratio went up to 10.3%.
Core capital evolution
(Million euros and percentage)
34,161 30,097
23,191 Core capital 17,898 16,731
Core capital 10.3 9.6 (%) 8.0 6.2 6.2
December
December December December December 2007 2008 2009 2010 2011
Bank capital (Tier I) increased by €2,109m
over the quarter, a rise of 6.6%, with the Tier I ratio standing at 10.3% (9.8% as of 30-Sep-2011), an improvement of 48 basis points over the quarter.
Other eligible capital (Tier II) at the same date, which includes subordinate debt, surplus generic provisions, eligible unrealized gains, and the deduction for holdings in financial and
insurance entities, was €8,609m, a fall over the quarter of 5.1%, mainly due to the amortization of an subordinated debt issue. As a result, Tier II stood at 2.6% as of 31-Dec-2011 (2.8% as of 30-Sep-2011).
Core ratio evolution following EBA criteria
7.10% +26 bp +104 bp +18 bp +13 bp -1 bp 8.70%
Core capital Organic Preference Floor U.S. Other Core capital Sept. 2011 generation shares elimination in impairment Dec.
2011 exchange AMA models
Total capital brings the capital base to €42,770m, 4.0% up on the previous
quarter.
Risk-weighted assets (RWA) amounted to €330,771m, an increase of 1.6% on the figure for
September, basically due to exchange-rate variations and the slight growth in lending over the quarter, above all in Mexico and South America. The entry into force of the tighter Basel 2.5 requirements (increased RWA for market risk when including
stressed VaR) was offset by a lower operational risk requirement due to the elimination of the capital floor in the advanced models.
Finally, the BIS ratio as of 31-Dec-2011 stood at 12.9% (12.6% as of
30-Sep-2011).
Ratings
In November 2011, the rating agency Standard & Poor’s published a new methodology for assigning financial
institutions ratings. As a result, BBVA’s rating was set at A+ (negative outlook), one notch below its previous rating of AA-. At the start of December, the agency placed the rating of Spanish sovereign on creditwatch negative, and subsequently
did the same for the ratings of 12 European financial institutions (among them BBVA). At the start of 2012 the agency completed its review of the sovereign rating, which has been downgraded by two notches (to A). So far it has not made any
announcement on BBVA’s rating, which continues on creditwatch negative. Fitch’s actions have been very similar. Mid-way through December the agency placed the rating of Spanish sovereign debt on creditwatch negative, and in January 2012 it
downgraded it by two notches (to A), but it has still not completed the review of BBVA’s rating.
Ratings
Long term Short term Financial strength Outlook
Moody’s Aa3 P-1 B- Negative
Fitch A+ F-1+ A+ Negative
Standard &
Poor’s A+ A-1+ - Negative
18 Group information
Risk
management
Credit risk
Despite the difficult economic environment in 2011, BBVA was able to improve and stabilize the primary indicators of credit quality. At the close of 2011, the NPA ratio was down to 4.0%,
the coverage ratio stood at 61% and the cumulative risk premium was 1.20% (compared with 1.33% at the close of 2010). Thus the Group continued to stand out from the rest of the system with respect to the positive performance of its risk indicators.
As of 31-Dec-2011, the volume of total risks (including contingent liabilities) was €400,709m, a
year-on-year increase of 4.3% and a growth over the quarter of 2.6%. The increase can be explained by the acquisition of Garanti and the growth in lending in Mexico and, above all, South America.
Non-performing assets have remained at practically the same level since December 2009, and at the close of 2011 amounted
to €15,866m. The year-on-year increase of 1.2% is the result of
Non-performing assets
(Million euros)
15,790 15,970 15,866 15,685 15,528 -0.7%
December
March June September December 2010 2011 2011 2011 2011
Credit risk management(1)
(Million euros)
31-12-11 30-09-11 30-06-11 31-03-11 31-12-10
Non-performing assets 15,866 15,970 15,790 15,528 15,685
Total risks 400,709 390,723 391,380 383,043 384,069
Provisions 9,688 9,503 9,576 9,490 9,655
Specific 6,471 6,584 6,485 6,516 6,823
Generic
and country-risk 3,218 2,919 3,090 2,974 2,832
NPA ratio (%) 4.0 4.1 4.0 4.1 4.1
NPA coverage ratio (%) 61 60 61 61 62
(1) Including contingent liabilities.
Variations
in non-performing assets
(Million euros)
4Q11 3Q11 2Q11 1Q11 4Q10
Beginning balance 15,970 15,790 15,528 15,685 15,560
Entries 3,610 2,918 3,713 2,804 3,852
Recoveries
(2,752) (1,874) (2,484) (1,882) (2,479)
Net variation 858 1,044 1,229 922 1,373
Write-offs (1,138) (876) (939) (1,140) (1,269)
Exchange rate differences and other 176 12 (28) 61 21
Period-end balance 15,866 15,970 15,790 15,528 15,685
Memorandum item:
Non-performing loans 15,647
15,689 15,515 15,210 15,361
Non-performing contingent liabilities 219 281 275 319 324
Risk management 19
the
acquisition of Garanti. Without this change in the scope of consolidation, there would have been a slight fall of 0.04%. In terms of variations in NPA over the year, the ratio of recoveries to gross additions to NPA stood at 68.9%, slightly above
the level in 2010 (68.6%). This is due to the stable levels of gross additions to NPA and recoveries.
Recoveries over entries to NPA
(Percentage)
68.9
64.4 67.1 66.9 64.2 76.2
4Q 1Q 2Q 3Q 4Q
2010 2011
As a result, the NPA ratio for the Group closed 2011 at 4.0%, which is down from the figure at the close of 2010 (4.1%).
This rate has remained stable over all the quarters, and has not exceeded the peak of a year ago. By business areas, the United States performed particularly well. Its NPA ratio fell by 81 basis points over the year to 3.6% at the end of 2011 (4.4%
in 2010). This is mainly the result of the fall in gross additions to NPA. Also notable was the performance of South America, where the NPA ratio improved by 26 basis points to 2.2% (2.5% in December 2010). In Spain, the NPA ratio ended the year at
the same level as the previous year (4.8%). In Mexico, it stood at 3.5% (3.2% as of 31-Dec-2010). In Eurasia, it increased to 1.5% (0.9% at the close of 2010) due to the acquisition of Garanti.
Coverage provisions for customer risk amounted to €9,688m on 31-Dec-2011, a similar figure to that at the end of
2010. Of this total, generic provisions and country risk provisions accounted for €3,218m and represent 33.2% of the total.
Finally, the NPA coverage ratio closed 2011 at 61%. By business areas, the coverage ratio was up in South America to 146% (130% at the end of 2010) and in the United States, where it
improved to 73% (61% in 2010). In Spain it closed 2011 at the same level as the previous year, 44%. In Eurasia it fell to 123%, also as a result of the
NPA and coverage ratios
(Percentage)
62 61 61 60 61
Coverage ratio
NPA ratio
4.1 4.1 4.0 4.1 4.0
December March June September December 2010 2011 2011 2011 2011
acquisition of Garanti (154% as of 31-Dec-2010); and in Mexico to 120% (152% as of 31-Dec-2010), where its fall is due to the early cancellation of the Federal Government’s Punto
Final plan in January 2011. It is also important to note that 62% of the risks are collateralized (58% at the close of 2010).
Economic capital
Attributable economic risk
capital (ERC) consumption amounted to €29,145m as of 31-Dec-2011, an increase of barely 0.7% on the previous quarter.
As is to be expected from BBVA’s profile, the largest allocation to ERC (64.3%) relates to credit risk on portfolios originated in the Group’s branch network from its own
customer base. This percentage remained stable in comparison with the close of the previous quarter.
Market
risk, which is of less importance given the nature of the business and BBVA’s policy of minimal proprietary trading has fallen back by 6.1% on the previous quarter, although it remains practically the same as a proportion of the total (1.7%).
Equity risk, which refers basically to the portfolio of holdings in the industrial and financial companies and the stake in CNCB, increased by 8.6% on the close of the previous quarter and amounts to 10.9% of the total capital. This increase is due
to the higher exposure in CNBC related to the appreciation of the Hong Kong dollar. Structural balance-sheet risk fell by 11.5%. It originates from the management of the Group’s structural interest-rate risk, and accounts for 6.8% of ERC.
Finally, operational risk was stable at 6.7% of total ERC.
20 Group information
The BBVA
share
Pressure on the markets in the fourth quarter of 2011 had a notable impact on fixed-income and the
European financial sector. One feature of this period has been that the focus of the investment community has moved beyond the intervened countries and those in the south of Europe, such as Spain and Italy, to Belgium or France.
In this context, equity markets were in general more stable than in the previous quarter. The Ibex 35 closed practically
lat (+0.2%), while the Stoxx 50 gained 9.7%. The US market performed better than the European, with the S&P 500 index recovering 11.2%, boosted by expectations of an improvement in US macroeconomic indicators.
The European banking sector continued to be affected by uncertainty regarding the resolution of the crisis. High sovereign
risk premiums kept capital markets effectively closed, thus making bank funding difficult. In this environment, the Euro Stoxx Banks index lost 4.7%, while Stoxx Banks closed practically lat. BBVA was one of the best stock-market performers among
European banks, and recovered 8.1% on the close of the previous quarter. The market has valued BBVA’s comfortable liquidity position and the advantages of a retail model that is less dependent on wholesale funding.
BBVA’s results for the third quarter of 2011 were received positively by analysts, who stressed the factors that set
the Bank apart from its peers: above all, the potential of its international businesses, its capacity to generate capital organically and thus the Group’s high
levels of solvency. The figures for the net interest income were very positively valued. This is particularly true for the emerging markets, where there was a notable growth in business
volume. In Spain, the consistently robust indicators of credit quality were also positively valued. The analysts once more highlighted the strength of results in South America and Mexico.
The BBVA share was up 8.1% in the quarter, closing at €6.68 per share, resulting in a market capitalization of
€32,753m. The price/ book value stood at 0.8 the P/E (calculated on the attributable pro it for the Group in 2011) at 10.9, and the dividend yield (calculated according to the average dividends per share estimated by the analysts for 2011 and
the share price as of December 30) at 6.3%. BBVA’s share price increased far above the Ibex 35 index and was also clearly better than the figures for the sector in the euro zone. In summary, in the current environment of tension and
macroeconomic weakness, the market has once more valued the Group’s sound capital position and its recurring earnings.
The average daily trading volume in the fourth quarter was 47 million shares, with an average value of €283m.
With respect to shareholder remuneration, payment of an interim dividend for 2011 was announced on December 20, at
€0.10 per share. This implies an increase of 11% on the same payment last year. The amount was paid on January 10, 2012. Additionally, the Board of Directors approved the exchange of preference shares for Mandatory Subordinated Bonds
convertible into newly issued ordinary shares of BBVA, for a maximum amount of €3,475m. There has been a very positive take-up on the offer, at 98.7% of investors holding preference shares, making the operation a big success. These subordinated
bonds will be considered as core capital under the EBA rules.
The BBVA share and share performance ratios
31-12-11 30-09-11
Number of shareholders 987,277 981,348
Number of
shares issued 4,903,207,003 4,824,793,497
Daily average number of shares
traded 46,896,175 69,688,609
Daily average trading
(million euros) 283 475
Maximum price (euros) 7.00 8.38
Minimum price (euros) 5.44 5.03
Closing price
(euros) 6.68 6.18
Book value per share (euros) 8.35 8.61
Market capitalization (million euros) 32,753 29,817
Price/Book value (times) 0.8 0.7
PER (Price/Earnings; times) 10.9 6.5
Yield
(Dividend/Price; %) 6.3 6.8
Share price index
(31-12-10=100)
140
130
BBVA 120
110
Stoxx 50 100
90
Europe Stoxx 80
Banks 70
60
50
31-12-10 31-03-11 30-06-11 30-09-11 31-12-11
The BBVA share 21
Corporate
responsibility
Throughout 2011, BBVA has worked to fully integrate the management of corporate responsibility
into the agendas of its management teams. Proof of the Group’s commitment in this respect is that starting this year the Bank’s Management Committee has taken on the functions of Corporate Responsibility and Reputation. This new system of
governance aims to extend the integration of the strategic management of environmental, social, ethical and corporate governance (ESG) variables across all the Bank’s business and support areas. In line with this process of integration, BBVA
has been included as a participant in the Pilot Program of the International Integrated Reporting Council (IIRC). The IIRC is made up of a select group of companies that will collaborate as a network to exchange knowledge and share experiences in
integrated reporting. The other CR milestones in the quarter have been as follows:
Financial inclusion
The BBVA Microfinance Foundation opened and moderated the plenary session of the World Microcredit Summit held
in Valladolid in November, at which the microfinance institutions Bancamía and Caja Nuestra Gente explained their experiences. Since May 2007, the Foundation has granted microcredits amounting to €2,500m to entrepreneurs in Latin
America, and it now has more than a million customers. The Foundation has also concluded an agreement with AMPYME, the Micro, Small and Medium-Sized Enterprise Authority of Panama. The agreement includes joint action to create financial products and
services, as well as training, skills extension and financial literacy programs and projects.
Financial
Education
As part of the corporate financial education program, BBVA Colombia has launched Adelante con tu
futuro (Forward with your future) to provide the adult population with the skills and knowledge they need to understand the operation and proper use of financial products. This will include workshops on savings, credit, credit health, transactional
channels and banking security.
Responsible banking
Responsible investment. BBVA Asset Management Continental (Peru) has launched a new fund called BBVA Leer es estar
adelante (‘BBVA Reading means keeping ahead), the first fund in the country set up to support a social cause. The resources will be used to boost the number of Peruvian school children taking part in the Leer es estar adelante program, which
aims to improve the reading ability of young children. Additionally, BBVA has supported the publication of the Socially Responsible Investment (SRI) Observatory, which reveals that the participants of SRI funds marketed in Spain have increased by
40% in 2010.
The Environment. BBVA has renewed its commitment to the fight against climate change. At the 17th
Conference of the
Parties to the United Nations Framework Convention on Climate Change (COP17) it signed the
“‘2ºC Challenge Communiqué” urging governments to take decisive action to address this problem. BBVA has sponsored once again this year the presentation of the Iberia 125 Report of the Carbon Disclosure Project 2011, which
examines the policies and actions taken by the major Spanish and Portuguese companies to reduce their carbon emissions.
Human Resources. BBVA Continental has been included in the ranking of the 45 best companies to work for in Peru drawn up by the Great Place to Work Institute.
Community Involvement
The social enterprise plans selected for the first edition of the Momentum Project presented their expansion projects to potential financiers at the Social Investment Day in October. BBVA
has also announced that it would fund seven of the ten projects taking part with nearly €3m through an investment vehicle designed by the Industrial and Real Estate Holdings unit.
BBVA and the Sustainability Indices
At the close of 2011, BBVA’s weightings in the main sustainability indices were as follows:
Main sustainability indices in which BBVA participates
Ponderación (%) Dow Jones Sustainability Indexes vige MSCI Indices FTSE4Good
DJSI World 0.52
DJSI Europe 1.20
DJSI Eurozone 2.58
ASPI Eurozone Index 2.16
Ethibel Sustainability
Index
Excellence Europe 1.49
Ethibel Sustainability Index
Excellence Global
0.85
MSCI World ESG Index 0.37
MSCI World ex USA ESG Index 0.74
MSCI Europe ESG
Index 1.30
MSCI EAFE ESG Index 0.84
FTSE4Good Global 0.38
FTSE4Good Global 100 0.61
FTSE4Good Europe 0.87
FTSE4Good Europe 50 1.39
For more information and
contact details, please visit
www.bancaparatodos.com
22 Group information
Business
areas
In this section we discuss the more significant aspects of the activities and earnings of the
Group’s different business areas, along with those of the main units within each, plus Corporate Activities. Specifically, we deal with the income statement, the balance sheet and the main ratios: efficiency, NPA ratio, NPA coverage ratio and
the risk premium.
Following the acquisition of 24.9% of the Turkish bank Garanti and its incorporation into
the financial statements of the Group starting in March 2011, BBVA began to have a significant presence in Europe and Asia in terms of its balance sheet and earnings. In addition, since the start of the crisis, the importance of the geographical
location of business has been clear for providing a proper perception of risks and an improved estimate of the capacity for future growth. Finally, the new regulations favor a local management of structural risks that avoids possible contagion
between financial systems. For these motives, the businesses included in Spain and Portugal and WB&AM during 2010 have been regrouped into the following areas:
Spain: includes BBVA businesses in all segments, within the country.
Eurasia: covers all BBVA activity in the rest of Europe and Asia, including the Group’s stake in Garanti.
This responds to the increased demand for geography-specific information from different users, including the regulators.
In addition, it is worth noting that in 2010 liquidity conditions on the financial markets have made access to finance
more expensive for Spanish credit institutions. BBVA has been no exception to this, and thus since January 2011, and with retroactive effect for 2010 data, the liquidity premium imputed to business areas through the system of internal reference
rates has been increased. The aim is to adapt to the new reality of the financial markets.
The business areas
are now organized as follows:
Spain, which includes: The retail network, with the segments of individual
customers, private banking, and small business and retail banking in the domestic market; Corporate and Business Banking (CBB), which handles the needs of SMEs, corporations, government and developers in the country; Corporate and Investment Banking
(C&IB), which includes activity with large corporations and multinational groups; Global Markets (GM), with the trading floor and distribution business in the domestic market; and other units, among them BBVA Seguros and Asset Management
(management of mutual and pension funds in Spain).
Eurasia, which includes business in the rest of Europe and
Asia. In 2010 it was reported either in Spain and Portugal (BBVA Portugal,
Consumer Finance Italy and
Portugal, and the retail business of branches in Paris, London and Brussels), or in WB&AM (Corporate and Investment Banking, Markets, CNCB and CIFH). Additionally, it also includes the information on Garanti.
Mexico: includes the banking, pensions and insurance businesses in the country.
United States: encompasses the Group’s business in the United States and in the Commonwealth of Puerto Rico.
South America: includes the banking, pensions and insurance businesses in South America.
As well as the units indicated, all the areas also have allocations of other businesses that include eliminations and
other items not assigned to the units.
Finally, the aggregate of Corporate Activities includes the rest of
items that are not allocated to the business areas. These basically include the costs of head offices with a strictly corporate function, certain allocations to provisions such as early retirements and others also of a corporate nature. Corporate
Activities also performs financial management functions for the Group as a whole; essentially management of asset and liability positions for interest rates in the euro-denominated balance sheet and for exchange rates, as well as liquidity and
capital management functions. The management of asset and liability interest-rate risk in currencies other than the euro is recorded in the corresponding business areas. It also includes the Industrial and Financial Holdings unit and the
Group’s non-international real estate businesses.
In addition, supplementary information is provided of
the global business (WB&AM) carried out by the BBVA Group. Homogeneous products and risks, and common characteristics of the customers served, make this aggregate of businesses relevant to better understand the BBVA Group.
Furthermore, as usual in the case of The Americas, both constant and current exchange rates have been applied when
calculating year-on-year variations.
The Group compiles reporting information on a level as disaggregated as
possible, and all data relating to the businesses these units manage is recorded in full. These basic units are then aggregated in accordance with the organizational structure established by the Group at higher-level units and, finally, the business
areas themselves. Similarly, all the companies making up the Group are also assigned to the different units according to the geographical area of their activity.
Once the composition of each business area has been defined, certain management criteria are applied, of which the following are particularly important:
Business areas 23
Capital:
Capital is allocated to each business according to economic risk capital (ERC) criteria. This is based on the concept of unexpected loss at a specific confidence level, depending on the Group’s capital adequacy targets. These targets have two
levels: the first is core equity, which determines the capital allocated. This amount is used as a basis for calculating the profitability of each business. The second level is total capital, which determines the additional allocation in terms of
subordinate debt and preferred securities. The calculation of the ERC combines credit risk, market risk, structural balance-sheet risk, equity positions, operational risk and fixed asset and technical risks in the case of insurance companies. These
calculations are carried out using internal models that have been defined following the guidelines and requirements established under the Basel II capital accord, with economic criteria prevailing over regulatory ones.
ERC is risk-sensitive and thus linked to the management policies of the businesses themselves. It standardizes capital
allocation between them in accordance with the risks incurred and makes it easier to compare profitability across units. In other words, it is calculated in a way that is standard and integrated for all kinds of risks and for each operation, balance
or risk position, allowing its risk-adjusted return to be assessed and an aggregate to be calculated for the profitability by client, product, segment, unit or business area.
Internal transfer prices: Internal transfer rates are applied to calculate the net interest income of each business, on both the assets and liabilities. These rates are composed of a
market rate that depends on the revision period of the operation,
and a liquidity premium that has been
revised as indicated above. Earnings are distributed across revenue-generating and distribution units (e.g., in asset management products) at market prices.
Assignment of operating expenses: Both direct and indirect costs are assigned to the business areas, except where there is no clearly defined relationship with the businesses, i.e. when
they are of a clearly corporate or institutional nature for the Group as a whole.
Cross selling: in some
cases, consolidation adjustments are required to eliminate shadow accounting entries in the results of two or more units as a result of cross-selling incentives.
Recurrent economic profit by business area
(January-December 2011. Million euros)
Adjusted net Economic profit
attributable profit
(EP)
Spain 1,697 652
Eurasia 991 445
Mexico 1,761 1,269
South America 762 413
The United States 276 (11)
Corporate Activities
(796) (793)
BBVA Group 4,691 1,976
Mayor income statement items by business area
(Million euros)
Business areas
South The United Corporate
BBVA Group Spain Eurasia Mexico America States Activities
2011
Net interest income 13,160 4,399 801 3,827 3,164 1,590 (621)
Gross income 20,566 6,357 1,952 5,550 4,457 2,277 (27)
Operating income 10,615 3,556 1,307 3,539 2,415 786 (987)
Income before tax 3,770 1,914 1,170 2,299 1,877 (1,061) (2,430)
Net attributable profit 3,004 1,363 1,027 1,741 1,007 (722) (1,413)
Net attributable profit (excluding one-offs)(1) 4,015 1,363 1,027 1,741 1,007 289 (1,413)
2010
Net interest income 13,320 4,878 345 3,688
2,495 1,794 121
Gross income 20,910 7,055 1,080 5,496 3,797 2,551 932
Operating income 11,942 4,240 785 3,597 2,129 1,034 158
Income before tax 6,422 3,160 675 2,281 1,670 309 (1,673)
Net attributable profit 4,606 2,255 588 1,707 889 239 (1,072)
Net attributable profit (excluding one-offs)(1) 4,606 2,255 588 1,707 889 239 (1,072)
(1) In the fourth quarter of 2011 a charge was booked for goodwill impairment in the United States.
24 Business areas
Spain
Income statement
(Million euros)
Spain
2011
D
% 2010
Net interest income 4,399 (9.8) 4,878
Net fees and commissions 1,468 (12.2) 1,672
Net
trading income 19 n.m. 2
Other income/expenses 471 (6.5) 504
Gross income 6,357 (9.9) 7,055
Operating costs (2,801) (0.5) (2,815)
Personnel
expenses (1,694) (1.1) (1,713)
General and administrative expenses (1,009) 0.4 (1,004)
Depreciation and amortization (98) 0.9 (97)
Operating income 3,556 (16.1) 4,240
Impairment on
financial assets (net) (1,711) 30.0 (1,316)
Provisions (net) and other gains (losses) 70 (70.6) 237
Income before tax 1,914 (39.4) 3,160
Income tax (550) (39.0) (902)
Net income 1,364
(39.6) 2,258
Non-controlling interests - - (2)
Net attributable profit 1,363 (39.5) 2,255
Balance sheet
(Million euros)
Spain
31-12-11
D
% 31-12-10
Cash and balances with central banks 13,358 232.8 4,014
Financial assets 68,974 10.2 62,591
Loans and
receivables 223,333 (1.8) 227,343
Loans and advances to customers 209,622 (1.7) 213,281
Loans and advances to credit institutions and other 13,711 (2.5) 14,062
Inter-area positions - - -
Tangible assets 922(5.0) 970
Other assets 3,325
22.1 2,723
Total assets/Liabilities and equity 309,912 4.1 297,641
Deposits from central banks and credit institutions 41,462 68.6 24,586
Deposits from customers 114,783 (9.8) 127,219
Debt certificates 3,668 - -
Subordinated
liabilities 5,802 3.2 5,621
Inter-area positions 67,526 (14.1) 78,629
Financial liabilities held for trading 48,351 39.1 34,761
Other liabilities 18,014 12.3 16,035
Economic capital allocated 10,306 1.4 10,160
Spain 25
Significant ratios
(Percentage)
Spain
31-12-11 30-09-11 31-12-10
Efficiency ratio 44.1 42.7 39.9
NPA ratio 4.8 4.9
4.8
NPA coverage ratio 44 42 44
Risk premium 0.78 0.77 0.60
Spain highlights in
the fourth quarter
Tight cost control of liabilities and improvement of spreads.
Deleveraging process positive for the liquidity gap in the area.
Successful exchange of preferred shares for convertible bonds.
Stable NPA and coverage ratios.
The area of Spain includes all the segments of BBVA’s banking and non-banking business in the country.
In the fourth quarter of 2011, the commercial activity of Spanish financial institutions was influenced to a great extent by the necessary and positive deleveraging process carried out in
the highest-risk sectors, the liquidity crunch in the wholesale funding markets, pressure on the costs of wholesale and retail liabilities and the deterioration of asset quality. The Spanish financial system is also still immersed in its own
restructuring process. Among the events of the quarter reflecting this situation, there was the intervention of the Banco de Valencia and the completion of the auction of Caja del Mediterráneo (CAM), previously intervened by the Bank of
Spain, which was finally awarded to Banco de Sabadell.
Against the backdrop of a growing liquidity crunch, the
Spanish banking system’s commercial networks have therefore continued to focus on attracting stable funds. In the last quarter there was a notable issuance of promissory notes to individuals and companies (over €40,000m). In the loan book,
household lending fell by 2.0% (latest available figures to November) on the December 2010 figure, a slightly lower decrease than at the close of the third quarter of 2011. New production of mortgages to individuals fell by 44.5% and consumer
finance by 41.9%. Corporate deleveraging has been more notable, at 5.1% over the same time period. For the year as a whole, the volume of loans in the Spanish banking system has been curtailed by €61,264m (€75,397m since 2008). Demand for
liability products focused on deposits and new conservative options such as promissory notes, which have been the focus of almost all the new funds gathered in the fourth quarter.
During 2011, increases in the base rates have led to a repricing of new credit transactions. At the
same time, renewal of stable funds has been at prices in line with these reference base rates, which has improved customer
spread.
Against this backdrop, BBVA continues to consolidate its leading position in the household and
corporate segments, in both asset products (such as mortgage lending) and liability products (stable funds). It is also increasing the profitability of its net interest income (measured against ATA), despite the reduction in the portfolios of
greatest risk and spread, thanks to good management of the customer spread, which has improved over the quarter to 2.10% in this area.
Gross lending to customers in Spain as of 31-Dec-2011 amounted to €214,156m, a year-on-year fall of 1.8% (less than the fall of 2.5% in the market as a whole). Yield on loans was up
by 13 basis points on the figure for 31-Dec-2010.
Customer funds under management (deposits, mutual funds and
pension funds, as well as promissory notes) amounted to €153,163m, a year-on-year fall of 0.7%. The fall was caused by the drop in off-balance-sheet funds, as stable funds in the balance sheet (including promissory notes and excluding repos and
other balances related to Markets) were up 3.4% over the last 12 months to €109,358m as of 31-Dec-2011. Thus the financial deleveraging process, which is considered necessary and positive for the country’s economy, together with the
favorable performance of these customer funds, have had a clearly positive impact on the liquidity gap in the area. It is worth noting that BBVA closed the year with a significant gain in market share of 21 basis points in household and corporate
transactional accounts which reached 9.6% (latest available figures from December 2010 to November 2011). The Group’s issue of promissory notes through its commercial networks began strongly in September, and its market share amounted to 8.4%
in December (latest available figures).
26 Business areas
In
off-balance-sheet funds, the Group manages €19,598m in mutual funds in Spain, a market share of 15.3%. BBVA’s assets under management fell by 3.1% over the quarter. The fall is still less marked than that recorded by the market as a whole,
given the greater weight of the more conservative products offered by the Bank. BBVA’s fund manager remains the market leader in pension funds in Spain, with a share of 18.7% (figures for September) and assets under management up 2.9% over the
last quarter to €17,224m.
Between September and October 2011 and for the second time in the year, the
Dividend Option gave shareholders the chance to receive their remuneration in shares. The uptake has been very satisfactory, as 91% of those with shares deposited at BBVA have chosen this formula rather than a cash dividend payment. It is also worth
noting that in December BBVA successfully closed the exchange of preference shares for mandatory subordinated bonds convertible into newly issued ordinary shares of BBVA. The take-up on the offer among investors was 98.7%, amounting to a total of
€3,430m. The successful uptake of this operation and others reveals the great capillarity of the BBVA network, the trust of its customers in BBVA and the mutual commitment between them and the Bank.
Stable quarterly figures for net interest income and other revenue, the high level of efficiency, and competitive
advantages in terms of asset quality with respect to the sector as a whole, have all characterized earnings for the area in 2011.
A combination of loan repricing, the greater weight of current and savings accounts, the high proportion of time deposits renewed at prices adjusted to the degree of customer bundling,
and risk selectiveness have resulted in a net interest income for the year of €4,399m, with very stable
quarterly figures (the figure for the fourth quarter was €1,091m). This was achieved despite the last six months of the year being characterized by more expensive wholesale funding and the loss of asset values as a result of market
difficulties.
Income from fees and commissions in the fourth quarter remained stable at €332m in an
environment of pressure from the financial markets influencing the fees linked to mutual funds, reduced M&A activity in the corporate sector, and cuts in fees to ensure greater customer loyalty. The figure for income from fees and commissions
over the year was €1,468m, which accounts for more than 23% of recurring revenue (gross income minus NTI). Revenue from the insurance business was also positive, at €339m (up 3.1% year-on-year). This was due to a number of factors,
including BBVA’s gains in market share in the main lines of activity in this business. NTI continues strongly affected by the negative performance of the financial markets. As a result of the above, gross income for the year as a whole was
€6,357m (€7,055m the previous year).
BBVA’s efficiency ratio (44.1%) is also a competitive
advantage, thanks to tight control of operating expenses, which fell by 0.5% on the figure for the previous year, despite the fact that its number of branches remained practically the same, unlike its competitors. Additionally, BBVA’s
productivity ratios have also improved, opening up a gap in its favor compared with the rest of the system. All this is the result of the appropriate and efficient management of various distribution channels.
The operating income for 2011 was €3,556m (€4,240m in 2010). This reflects the resilience of
Spain. Operating income Spain. Net attributable profit
(Million euros)(Million euros)
-16.1% -39. 5%
4,240 3,556 2,255 1,363
1,238 714
1,162 651
1,062
989 982
851 515 477
763 749 419
374
265
202
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2010 2011
Spain 27
BBVA’s recurrent earnings in a year plagued by economic and financial difficulties. At the same time, it reveals that
it has room to meet the needs for loan-loss provisioning in the domestic market, with impairment losses on financial assets at €1,711m, representing 48% of the operating income.
Another competitive advantage with respect to its sector is BBVA’s asset quality in Spain, with a very stable NPA
ratio of 4.8% as of 31-Dec-2011, notably lower than the 7.5% as the average for the market. There was practically no increase of asset impairments over the year in the area, while in the system as a whole the ratio was up 179 basis points. The
coverage ratio remains at the same levels as the previous year, at 44%. The practically stable volume of distressed assets is due to a moderation of gross additions, with an increase of recoveries.
The absence of extraordinary earnings, compared with the figure of €249m the previous year, led to a 39.5%
year-on-year decrease in the area’s profit to €1,363m.
Exposure to the developer sector continues to
fall in Spain, and as of 31-Dec-2011 it stood at €14,158m, €2,450m below the figure at the close of 2010. Of this total, nearly 49% corresponds to finished properties, 17% to construction in progress and 26% to land. Out of the total,
non-performing and substandard loans account for €5,795m. This figure is below that for the last quarter (€6,024m) and that for last year (€5,924m). The value of the collateral covering developer risk, based on up-to-date appraisals,
is €19,288m, which maintains the average LTV at 73% and easily covers the portfolio value. In addition, specific and generic provisions cover 73% of NPL and substandard balances
Detail of real estate developers lending
(Million euros)
31-12-11 % Weighting 31-12-10 %
Weighting Absolute variation
With collateral 13,053 92.2 15,249 91.8 (2,196)
Finished properties 6,930 48.9 7,403 44.6 (473)
Construction in progress 2,448 17.3 3,531 21.3 (1,083)
Land 3,675 26.0 4,315 26.0 (640)
Without
collateral and other 1,105 7.8 1,359 8.2 (254)
Total 14,158 100.0 16,608 100.0 (2,450)
Coverage of real estate developers exposure
(Million euros at 31-12-11)
Risk amount Shortfall
over collateral (1) Provision % Coverage over shortfall % Coverage over risk
NPL 3,743 1,725 973 56 26
Substandar 2,052 911 268 29 13
Generic provision 456
Total 5,795 2,636 1,697 64
29
(1) Shortfall over updated collateral values and additional haircut established by the Bank of Spain
regulation.
Foreclosures and asset purchases
(Million euros at 31-12-11)
Gross amount Provision % Coverage Net amount
From
real estate developers 5,101 1,740 34 3,361
From Dwellings 1,509 401 27 1,108
Other 1,104 454 41 650
Total 7,714 2,595 34 5,119
28 Business areas
and 92% of
the amount to be provisioned (the value in excess of the guarantees after applying the regulatory criteria that entered into force with Bank of Spain Circular 3/2010). BBVA also maintains a total of €5,101m in real estate assets at gross book
value which originally were loans to companies. These properties have an average coverage ratio of 34.1%. It is also worth noting that coverage ratio for land stands at 37.5%. Out of this, 52% is developed land, 45% is building and only 2% is rustic
land.
Retail and Commercial Banking
This unit includes the Retail Network, with the household customers, private banking, small companies and retailer segments in the Spanish market; Corporate and Business Banking (CBB),
which handles the needs of the SMEs, corporations, the public sector and developers; and other businesses, including the insurance arm BBVA Seguros.
Within the Retail Network, lending closed 2011 with a balance of €102,158m (down 4.0% year-on-year). Customer deposits (including promissory notes) stood at €77,114m (up 4.0%).
Thus there is a clear improvement in the unit’s liquidity gap.
In 2011 BBVA met with its financial
commitments to individual customers, businesses and the self-employed by increasing its share of residential mortgage lending by 8 basis points over the year, according to the latest available figures, in a market where new production fell back
significantly by 45% year-on-year. The unit had a new production of €4,763m in mortgages over the year, 13.3% of the sector. The personalized and special features of the Bank’s mortgage products have allowed it to respond to demand quickly
and flexibly. At the same time the spread has increased by 35 basis points, even in the last 12 months, thanks to an adequate policy of prices and costs and good control of the risk parameters.
With respect to consumer finance, the accumulated new production for the year stood at €1,361m, and BBVA’s
market share was consolidated at 10.5% in the stock.
In terms of customer funds, the available profitable
products, as well as the efficient management of the maturities of time deposits issued in 2010 have enabled BBVA to reach for the second year in a row a market share of 8.3% in current and savings accounts, plus time deposits for the household
segment, 11 basis points up on the close of 2010.
Within customer deposits, in current and savings accounts
during the fourth quarter, there was the launch of a new Quincena de Cuentas Abiertas account campaign in November, as well as the capture of 16,141 new payroll accounts and 19,686 new pension-linked accounts (both, figures to November). In payroll
accounts, the market share increased by 29 basis points to 9.5%, and in pension linked accounts by 40 basis points to 9.6%. Time deposits remained profitable for customers, according to their loyalty level. As a result, the year ended with a renewal
of 78% of the products sold in 2010, but with a notable reduction in costs. In addition, since September the retail segment has gathered €2,381m in promissory notes.
Assets under management in pension plans in Spain increased by 2.9% over the quarter to a cumulative new production in the quarter of €415m. This was the result of the launch of a
competitive offer of guaranteed fixed-income plans and support from two campaigns: Bonificación de aportación y traspasos a planes de campaña del 2%-4%” (giving a bonus for people transferring their pension plans) and
Quincena de Cuentas Abiertas (Open Accounts Fortnight). Finally, it is worth pointing to the launch at the end of November 2011 of a new life insurance savings plan: Plan de Previsión Asegurado Acumulación (PPA Acumulación) (the
Cumulative Guaranteed Pension Plan), which completes the range of retirement pension products. It offers a set return at maturity and the same tax advantages as pension plans.
In the self-employed segment, the launch of the campaign to attract new customers and to build the loyalty of existing ones, called Plan + Profesional led to an increase of €1,000m in
customer funds and 2,000 new customers at the end of the year.
In the retail trade segment, the new campaigns
both to attract new customers and maintain the loyalty of existing ones have focused on the “Bono TPV” and “Transactional” offers with excellent results in turnover of POS. Among the most notable commercial actions are the
renewal of agreements with the following: the National Association of the Self-Employed (ATA), with 450,000 members; the National Federation of Lottery Associations (ANAPAL) with more than 5,000 members; the Spanish Modern Hotel and Catering
Association (FEHRCAREM) with more than 3,000 franchises; the Spanish Retail Confederation (CEC) with 450,000 members; IAC Automoción, with 1,500 members; and the Union of Tobacconists (UAEE), with 11,000 members.
CBB manages lending of €88,173m and customer deposits including promissory notes totaling €21,602m.
Support to Spanish companies was a priority in 2011. BBVA has done so mainly through two vehicles: commercialization of
ICO lines, as well as collaboration with the Official Credit Institute (ICO) in the dissemination and development of ICO Directo; and with the European Investment Bank (EIB), through a new Public Sector line. BBVA has, for another year, played a key
role as one of the most active banks in the distribution of various ICO credit facilities, with the conclusion of 31,745 transactions for a total of €2,393m, a market share of 12.7%.
In terms of working capital financing, BBVA granted factoring transactions for €12,920m and accounts payable advances
and deferments for €14,109m, thus consolidating its leading position in this business.
In the corporate
segment BBVA also maintains a leading position with large companies, with a penetration share of 67.5% and a 27% market share as the leading financial supplier (according to the FRS-Inmark-2011 report). Within SMEs (corporate entities with a
turnover of under €50m and more than 10 employees), the penetration share is 34% and share as leading financial provider 12.1%, according to the same source.
In corporations, BBVA is the absolute market leader, with 96.7% of penetration share. It is the primary or reference bank for most
Spain
29
customers
thanks to its outstanding service and the customer-relationship model that defines this group.
BBVA Private
Banking serves customers with more than €300,000 in liquid assets and also encompasses the wealth management unit (Patrimonios) for customers/family groups with more than €2m available. Positive aspects in the year include the increase of
1% in the number of customers and the recognition for the second year in a row as the best private bank in Spain in the 2011 Global Private Banking Awards, held annually by The Banker, the prestigious Financial Times Group magazine specializing in
international banking. BBVA Private Banking remains the sector leader in terms of assets under management, at more than €2,700m (11.2% market share) at the close of 2011, pertaining to 290 SICAVs.
Finally, in the insurance unit, covered savings continue to perform well (up 178% year-on-year), particularly the company
insurance schemes, with €464m of written premiums (up 152%), making it a clear reference in this market. As a result, the volume of funds under management in insurance savings policies amounted to €8,792m (up 8% year-on-year). BBVA Seguros
is still the market leader in individual life and accident insurance policies, with a market share of 10.5% as of September (latest data available). The level of activity in the non-life business has been maintained. The unit has also brokered
premiums for other companies for €161m.
Wholesale Banking
This unit manages the business with large corporations and multinational groups in the domestic market through Corporate
and Investment Banking (C&IB), and the activity of Global Markets in the same geographical area, with their trading floor and distribution business. It is a customer base with diversified business and high cash flows from other countries. BBVA
is
able to offer a full range of products and services, supported by its extensive international presence.
In Spain, at the close of the year Wholesale Banking managed a loan book of €23,339m and on-balance-sheet
customer funds (not including repos) of €9,903m, a growth of 7.2% and 18.3% respectively on the close of the previous year. The unit continues to focus strongly on customers with the highest levels of loyalty, profitability and credit quality.
The most significant aspects of earnings are as follows:
Resilient recurrent revenue in the unit (net interest income plus fees): the figure for the year as a whole is very
similar to 2010, at €945m. Specifically, in WB&AM this revenue was up 3.3% in the last 12 months.
The
current economic situation, the low level of business and the fall in asset prices in general, explain the negative NTI for the year, although it is less negative than the figure for 2010.
As a result, the gross income of €921m is 1.3% under the figure for the close of 2010. However, it is worth
highlighting the favorable performance of gross income in the WB&AM unit, which was up 7.2% year-on-year, and the positive trend in customer revenue in Global Markets, particularly in those businesses that are strategic for the unit, such as
credit.
Year-on-year growth in operating expenses was 8.0%, explained by the investment project underway that
has been mentioned in previous quarters; as a result, the operating income was down 7.2% year-on-year to €532m.
Impairment losses on financial assets were stable, and net attributable profit at the close of 2011 came to €363m (€397m as of 31-Dec-2010).
30 Business areas
Eurasia
Income statement
(Million euros)
Eurasia
2011
D
% 2010
Net interest income 801 132.1 345
Net fees and commissions 391 66.1 236
Net trading
income 105 (20.8) 132
Other income/expenses 655 78.4 367
Gross income 1,952 80.7 1,080
Operating costs (645) 118.6 (295)
Personnel
expenses (355) 98.2 (179)
General and administrative expenses (245) 147.6 (99)
Depreciation and amortization (45) 165.1 (17)
Operating income 1,307 66.5 785
Impairment on
financial assets (net) (149) 66.3 (89)
Provisions (net) and other gains (losses) 11 n.m. (20)
Income before tax 1,170 73.3 675
Income tax (143) 61.7 (88)
Net income 1,027 75.0
587
Non-controlling interests - - 1
Net attributable profit 1,027 74.8 588
Balance
sheet
(Million euros)
Eurasia
31-12-11
D
% 31-12-10
Cash and balances with central banks 1,340 289.6 344
Financial assets 11,581 84.3 6,285
Loans and receivables 38,754 46.1 26,530
Loans
and advances to customers 33,905 42.4 23,813
Loans and advances to credit institutions and other 4,850 78.5
2,716
Inter-area positions - - 12,020
Tangible assets 604 62.3 372
Other assets 1,119
163.3 425
Total assets/Liabilities and equity 53,398 16.1 45,975
Deposits from central banks and credit institutions 18,038 (8.1) 19,624
Deposits from customers 21,786 4.3 20,884
Debt certificates 818 n.m. 0
Subordinated
liabilities 2,102 49.2 1,409
Inter-area positions 1,893 n.m. -
Financial liabilities held for trading 401 148.4 161
Other liabilities 4,107 204.0 1,351
Economic capital allocated 4,254 67.1 2,546
Eurasia 31
Significant ratios
(Percentage)
Eurasia
31-12-11 30-09-11 31-12-10
Efficiency ratio 33.0 32.8 27.3
NPA ratio 1.5 1.5
0.9
NPA coverage ratio 123 118 154
Risk premium 0.45 0.28 0.38
Eurasia highlights in
the fourth quarter
Start of collaboration and generation of synergies with Garanti.
Year-on-year growth of the profit reported by CNCB for 3Q: +41%.
Positive performance of business in Europe.
Eurasia confirms its contribution in terms of earnings and diversification.
This area covers BBVA’s activity in Europe (excluding Spain) and Asia. In other words, it includes BBVA Portugal, Consumer Finance Italy and Portugal, the retail business of branches
in Paris, London and Brussels (in 2010 these were reported in Spain and Portugal), and WB&AM activity (Corporate and Investment Banking, Global Markets and CNCB) within this geographical area. It also covers the Group’s stake in Garanti.
From a macroeconomic point of view, the performance of this business area is twofold due to different
evolution of the advanced economies in Europe, on the one hand, and emerging economies such as China and Turkey on the other. In the fourth quarter of 2011 the European economy as a whole showed weak growth. However, this growth continues to be
uneven. The peripheral countries showed the greatest slowdown, or even entered into a renewed recession, while those in central Europe posted higher rates of growth. The resurgence of the financial turmoil starting mid-way through the year, and the
publication of data showing greater weakness in the core regions, spurred a change in expectations regarding a toughening of monetary policy. As a result, the ECB has reversed the early rise in rates and has continued its policy of supporting
liquidity in a context where inflation is slightly above target. In contrast, Asia and Turkey have maintained their growth rates, although at lower levels than in previous periods. This is due to the slowdown in global growth, and the adoption by
local authorities of economic policies designed to prevent overheating.
As a result, Eurasia continues to
perform well overall, generating an accumulated net attributable profit for the year of €1,027m, or 25.6%
of the Group’s total earnings excluding one-offs. This net attributable profit added geographical diversification to
the Group and reflects its commitment to emerging countries with economic growth potential.
In terms of
business activity in the area, gross lending to customers as of 31-Dec-2011 was at similar levels to the previous quarter, at €34,740m. This represents a year-on-year increase of 43.1%, due to the incorporation of Garanti. Excluding the
contribution from the Turkish bank, the loan book remained very stable, with an increase of 3.2%.
Customer
funds totaled €21,470m, a fall of 5.8% over the quarter due to global businesses in Europe, as deposits in Turkey continue to show a good performance.
By business unit, Europe accounts for 45% of earnings for the year. Its positive growth can mainly be explained by the consolidation of Garanti, and to a lesser extent by the good
performance of the rest of the local businesses. It is worth noting the positive performance of gross income, which amounted to €1,283m, 95.1% up on the previous 12 months. Excluding Garanti, gross income growth was 6.9%, despite the
unfavorable situation of the financial markets. As a result, the net attributable profit rose 86.1% to €464m, or 8.7% excluding Garanti.
Asia accounts for 55% of results in the area. The net attributable profit was up by 66.4%, mainly due to the growing contribution from CNCB, whose activity and earnings are increasing
quarter by quarter. According to the latest available figures to September 2011, the loan book increased by 9.4% on the figure for the close of
Eurasia. Operating income Eurasia. Net attributable profit
(Million euros) (Million euros)
+66.5% +74.8%
785 1,307 588 1,027
420 322
317 321 251 257
257 249 198
199 147 147 169
159 170 124
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2010 2011
32 Business areas
Eurasia:
Lending breakdown by geography (31-12-2011)
Rest of Europe 60% Turkey 28% Asia 12%
Eurasia: On-balance sheet customer funds breakdown by geography (31-12-2011)
Rest of Europe 52% Turkey 45% Asia 3%
Eurasia: Gross Income breakdown by geography (31-12-2011)
Rest of Europe 36% Turkey 30% Asia 34%
Eurasia:
Net Attributable Profit breakdown by geography (31-12-2011)
Rest of Europe 26%
Turkey 19%
Asia 55%
2010, customer deposits grew by 8.0% and
the accumulated net attributable profit for the year was up 40.9% year-on-year. Overall, Asia generated gross income of €669m (up 58.3% year-on-year) and a net attributable profit of €563m.
In the fourth quarter of 2011, BBVA continued to make progress in its strategic alliance with CNCB aimed at exploring new
business opportunities. In addition, the Bank has been recognized as the Best Trainer of Chinese Professionals by the prestigious association China Club. The award recognizes the Group’s work to attract talent in the Asian country.
The most notable aspects of Garanti in the fourth quarter of 2011 are as follows (data for Garanti Bank):
Continued sound progress in the loan book (up 29.6% year-on-year), although at a slower pace than in previous quarters.
This is due to the Central Bank’s policies designed to prevent the Turkish economy from overheating. However, it is worth noting that lending growth in Garanti over the quarter was above the sector as a whole (up 3.3% in Garanti and up 2.7% in
the sector). More specifically, the retail portfolio showed outstanding growth across the board (consumer finance, mortgages and credit cards).
Customer deposits have maintained their upward trend (up 5.5% over the quarter and 17.5% over the year) also above those for the rest of the sector (up 1.9% over the quarter and 12.5% for
the year).
The bank’s gross income rose to €1,807m, a rise of 6.6% over the last 12 months. This
performance is explained by the appropriate mix in the loan book and customer funds, the positive price management with repricing of the loan portfolio, and the favorable trend in business activity.
Garanti continues to be an example in the Turkish banking sector in terms of efficiency, with operating expenses rising
below inflation.
It also has an excellent asset quality, with NPL and coverage ratios of 1.8% and 82%
respectively, significantly better than those of the rest of the sector.
As a result, Garanti generated a net
attributable profit of €1,313m.
Finally, it is worth highlighting that the Turkish bank and BBVA have
started to collaborate. Specific working teams have been set up with members from both banks to identify and implement projects that can help increase the value of the Group’s franchises. One of the projects in place is the identification of
corporate customers with a presence or interest in Turkey. Work is already underway with these customers on specific new financial transactions. With regard to technology, given Garanti’s sound technological and operational platform, plans have
been implemented to exchange know-how between Garanti, BBVA Bancomer and BBVA Spain.
Garanti. Composition of
assets and lending portfolio (1)
(December 2011)
Composition of assets
Other 4.0% Loan to customers 57.0%
Cash and banks
15.4% Securities 23.6%
Lending portfolio
Corporate 18.3%
Consumer 18.5%
Credit cards 11.9%
SME 11.8%
Commercial 39.5%
(1) Garanti Bank only.
Garanti. Composition of liabilities (1)
(December 2011)
Other 5.6%
Shareholders’ equity 12.0%
Fund borrowed 14.7%
Repo obligations 7.5%
Deposits from banks 1.4%
Bonds issued 2.5%
Deposits from customers 56.3%
(1) Garanti Bank
only.
Eurasia
33
Mexico
Income statement
(Million euros)
Units:
Mexico Banking Business Pensions and Insurance
2011
D
%
D
%(1) 2010 2011
D
%
D
%(1) 2010 2011
D
%
D
%(1) 2010
Net interest income 3,827 3.8 7.2 3,688 3,746 3.4 6.8 3,623 73 19.9 23.8 61
Net fees and commissions 1,194 (3.2) 0.0 1,233 1,114 (3.8) (0.6) 1,158 72 1.4 4.7 71
Net trading income 302 (23.4) (20.9) 395 239 (15.5) (12.7) 283 63 (43.7) (41.8) 112
Other income/expenses 227 26.8 31.0 179 (111) (22.8) (20.2) (144) 398 17.3 21.2 340
Gross income 5,550 1.0 4.3 5,496 4,988 1.4 4.7 4,920 606 3.9 7.4 583
Operating costs (2,012) 5.9 9.4 (1,899) (1,896) 7.8 11.4 (1,758) (157) 5.6 9.1 (149)
Personnel expenses (860) 0.4 3.8 (856) (787) 0.3 3.6 (784) (73) 2.3 5.7 (71)
General and administrative expenses (1,045) 9.2 12.9 (956) (1,005) 12.9 16.7 (890) (82) 9.1 12.7 (75)
Depreciation and amortization (107) 23.7 27.8 (86) (104) 24.7 28.8 (84) (3) (5.4) (2.2) (3)
Operating income 3,539 (1.6) 1.6 3,597 3,092 (2.2) 1.0 3,162 449 3.3 6.8 434
Impairment on financial assets (net) (1,180) (4.0) (0.9) (1,229) (1,180) (4.0) (0.9) (1,229) - - - -
Provisions (net) and other gains (losses) (60) (30.7) (28.4) (87) (57) (34.1) (31.9) (86) (3) n.m. n.m. (0)
Income before tax 2,299 0.8 4.2 2,281 1,856 0.5 3.9 1,846 445 2.7 6.1 434
Income tax (555) (2.6) 0.6 (570) (430) (4.6) (1.4) (450) (126) 5.3 8.8 (119)
Net income 1,744 2.0 5.3 1,711 1,426 2.2 5.6 1,396 320 1.7 5.1 314
Non-controlling interests (3) (32.4) (30.1) (4) (0) (2.3) 0.9 (0) (2) (8.1) (5.0) (3)
Net attributable profit 1,741 2.0 5.4 1,707 1,426 2.2 5.6 1,395 317 1.8 5.2 312
(1) At constant exchange rate.
Balance sheet
(Million euros)
Units:
Mexico Banking Business Pensions and
Insurance
31-12-11
D
%
D
%(1) 31-12-10 31-12-11
D
%
D
%(1) 31-12-10 31-12-11
D
%
D
%(1) 31-12-10
Cash and balances with central banks 5,504 (13.5) (5.7)
6,365 5,504 (13.5) (5.7) 6,365 - - - -
Financial assets 26,182 1.7 11.0 25,737 21,320 1.8 11.0 20,946 5,103
1.1 10.2 5,050
Loans and receivables 39,643 (1.6) 7.4 40,277 39,203 (2.1) 6.8 40,029 488 61.6 76.3 302
Loans and advances to customers 34,681 (0.2) 8.9 34,743 34,544 (0.2) 8.8 34,626 169 11.1 21.2 152
Loans and advances to credit
institutions and other 4,961 (10.4) (2.2) 5,535 4,660 (13.7) (5.9) 5,402 320 112.6 131.9 150
Tangible assets 986 11.1 21.2 887 980 11.4 21.5 880 6 (15.9) (8.3) 8
Other assets 1,968 4.4 13.9 1,886 2,949 33.7 45.8 2,206 150 (6.6) 1.9 160
Total assets/Liabilities and equity 74,283 (1.2) 7.8 75,152 69,957 (0.7) 8.4 70,425 5,748 4.1 13.6 5,520
Deposits from central banks and credit institutions 11,344 (12.3) (4.3) 12,933 11,344 (12.3) (4.3) 12,933 - - - -
Deposits from customers 36,131 (2.4) 6.5 37,013 36,150 (2.4) 6.5 37,033 - - - -
Debt certificates 3,889 0.7 9.9 3,861 3,889 0.7 9.9 3,861 - - - -
Subordinated liabilities 2,399 19.1 29.9 2,014 3,501 41.5 54.3 2,474 - - - -
Financial liabilities held for trading 5,438 12.0 22.2 4,855 5,438 12.0 22.2 4,855 - - - -
Other liabilities 10,638 (1.1) 7.8 10,761 5,571 (5.4) 3.1 5,892 5,406 3.4 12.8 5,228
Economic capital allocated 4,444 19.7 30.6 3,714 4,064 20.4 31.3 3,376 336 15.2 25.7 292
(1) At constant exchange rate.
34
Business areas
This area
comprises the banking, pensions and insurance business conducted in Mexico by the BBVA Bancomer Financial Group (hereinafter, BBVA Bancomer).
In 2011, the Mexican economy continued its recovery that began in mid-2009, with expected growth for the year at 3.8%. This increase is mainly due to domestic factors. Of note are its
solid performance in private demand, stability in the rate of job creation in the formal sector, as well as the incipient improvement in real wage growth, which has contributed decisively to maintaining the rate of private consumption.
This sustained improvement has not generated inflationary pressures, as the increase in the national consumer price index
(INPC) in 2011 was 3.4%, approximately one percentage point less than in 2010. The Bank of Mexico has thus been able to continue with its monetary policy in force since mid-2009, and maintained the lending rate at 4.5%.
With respect to currency movements over the year, the official rate of the Mexican peso lost 8.3% against the euro
year-on-year. Thus the impact of the currency on the balance sheet and business activity in the area is negative. There was also depreciation in terms of average exchange rates, although in this case to a lesser extent (down 3.2% year-on-year).
Thus, the effect of the currency on the income statement was also negative. Over the quarter, the influence of the peso has been positive on the balance sheet and business activity, but negative on earnings. Unless otherwise indicated, all comments
below refer to changes at constant exchange rate.
Over the years, Mexico has developed clear strengths in
terms of the definition and implementation of its monetary and fiscal policies and prudent regulatory measures, which are especially important in matters such as the soundness of the Mexican banking system.
In 2011, BBVA Bancomer achieved earnings figures that set it apart from its main competitors. Net interest income was
€3,827m, 7.2% up on the previous year, due to increased business activity and good price management. This has offset the effect of low interest rates and the reduced contribution from global business. In terms of profitability, net interest
income over average total assets demonstrated great stability over the past year. Income from fees and
Mexico
highlights in the fourth quarter
Net interest income growth.
Positive contribution from the insurance business.
Efficiency ratio at 36.2%.
Leadership position in transparency and sustainability.
Significant ratios
(Percentage)
Mexico
31-12-11 30-09-11 31-12-10
Efficiency ratio 36.2
36.2 34.6
NPA ratio 3.5 3.5 3.2
NPA coverage ratio 120 128 152
Risk premium 3.29
3.39 3.65
Mexico. Operating income
(Million euros at constant exchange rate)
+1.6%
(1)
3,482 3,539
858 888 880 856 874 897 859 909
1Q 2Q 3Q 4Q 1Q 2Q
3Q 4Q
2010 2011
(1) At current exchange rate: - 1.6%.
Mexico. Net
attributable profit
(Million euros at constant exchange rate)
+5.4% (1)
1,652 1,741
355 422 436 440 416 439 393 494
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011
(1) At current exchange rate: +2.0%.
Mexico
35
commissions remained at the same level as the previous year, at €1,194m. The performance of asset management fees
(investment companies and pension funds) was able to offset the less favorable evolution of banking fees influenced by regulatory changes. The situation of the financial markets, especially in the last part of the year has led to lower brokerage
revenues. As a consequence, NTI registered a fall of 20.9% year-on-year at the close of 2011 to €302m. Finally, other income and expenses totaled €227m, up 31.0% year-on-year, boosted mainly by activity in the insurance business. As a
result of the above, gross income reached €5,550m, 4.3% higher than the figure for 2010.
Operating
expenses stood at €2,012m, 9.4% up on the figure for 2010. This is the result of BBVA Bancomer’s investment in infrastructure, innovation and technology to take advantage of the growth opportunities in the Mexican market. Over the course
of 2011, its distribution network grew by 14 additional branches, 950 ATMs and 20,300 POS. The efficiency ratio stood at 36.2%, confirming that BBVA Bancomer is one of the most efficient banks in the Mexican banking system.
With these evolutions of revenue and expenses, the operating income amounted to €3,539m, which is 1.6% above the
figure achieved in 2010.
Lending growth has been accompanied by adequate risk management. This has enabled
impairment losses on financial assets to remain at similar levels to those of the previous year, while the accumulated risk premium has improved by 36 basis points over the year to 3.29%. The NPA and coverage ratios closed the year at 3.5% and 120%
respectively.
As a result of the above, the area’s net attributable profit reached €1,741m, 5.4% up
on the previous year. It is worth noting that BBVA Bancomer closed 2011 with a ROE of 20% (according to local accounting criteria), making it one of the most profitable entities in the Mexican banking system
Banking Business
The banking business in Mexico generated a net attributable profit in 2011 of €1,426m (up 5.6% year-on-year).
BBVA Bancomer continues to take advantage of market opportunities, and through an appropriate commercial management strategy it recorded gross customer lending (excluding the old mortgage
portfolio) of €35,538m as of 31-Dec-2011, up 9.3% year-on-year. The figure was boosted mainly by retail lending. Wholesale lending has been affected by specific events that have limited its growth. These include the early payment by the Federal
Government of a credit line underwritten with a number of banks in the country; and the switch made by large corporations from bank lending to financing in wholesale markets due to the low interest rates.
The retail portfolio performed strongly and grew 14.3% year-on-year as of 31-Dec-2011 to €17,717m. It includes
consumer finance, credit cards, individual mortgages and loans to small businesses.
Within the retail
portfolio, consumer finance (including credit cards) presented a balance up 23.6% year-on-year to €8,070m. The boost from consumer loans (car, payroll and personal) led to an increase of 16.3% in new loans over the last twelve months, while the
outstanding balances increased at a rate of 36.2% over the same period. Credit card lending amounted to €4,486m over the same period, 15.0% up on the previous year. As a result, BBVA Bancomer gained 68 basis points in market share and
maintained its position as market leader.
BBVA Bancomer’s extensive expertise in mortgage lending has
enabled it to grant the highest number of new mortgages -one out of every three- out of all the banks and Sofoles. Thus, it has granted more than 32,900 individual mortgages, which as of 31-Dec-2011 registered a year-on-year increase of 13.2% in new
production and a mortgage loan balance (excluding the old mortgage portfolio) of €8,234m, 5.5% up on 2010.
At the same time, the wholesale portfolio, which includes loans to corporations, SMEs, financial institutions and the
public sector, was up 3.7% year-on-year. Broken down by segment, lending to corporates was up 6.2% to €6,371m, and lending to SMEs increased by 14.8%. Finally, loans to the public sector increased by 10.4% to €3,316m.
The above explains the gradual shift in the composition of the loan portfolio over the year toward a more profitable mix.
The weight of consumer lending grew from 21% in 2010 to 24% in 2011, while mortgage loans represented 24% of the total in 2011 and the commercial portfolio,
36
Business areas
the
largest in volume, accounted for 52% as of 31-Dec-2011.
Customer funds (bank deposits, repos, mutual funds and
investment companies) closed on 31-Dec-2011 at €55,326m, with a year-on-year increase of 9.8%. There was a notable increase in fund gathering in local-currency demand deposits, which were up 10.0% year-on-year at the close of 2011 to
€21,129m. Retail customer demand deposits have performed particularly well, with a rise of 8.2% on the close of 2010. This rise maintains the profitable mix of liabilities, as 76% of customer deposits on the balance sheet are low-cost funds. In
terms of off-balance-sheet funds, the performance of mutual funds has been excellent, reaching a balance of €15,612m as of 31-Dec-2011, with a year-on-year increase of 11.0%.
Through its autonomous management model that is independent of the parent company, BBVA Bancomer maintained efficient
handling of liquidity and capital levels. In 2011, more than 118,000m pesos were issued on the Mexican market. To ensure adequate capital management, Bancomer made a capital notes issue on the international markets of USD 2,000 million. Thus, at the
close of 2011, BBVA Bancomer’s total capital ratio stood at 15.8% (according to local accounting standards).
Finally, BBVA Bancomer achieved third place in the “Most sustainable bank” ranking out of 55 companies due to its community involvement in Mexican society. This recognition was
granted by the Inter-American Development Bank (IDB) and covers the areas of environmental sustainability, social responsibility and corporate governance. It also won third place out of 86
participating companies in the list of most transparent companies according to the “Transparency and Corporate
Sustainability Index in Mexico”.
Pensions and insurance
In 2011, the pensions and insurance business generated a net attributable profit of €317m (up 5.2% year-on-year).
In the pensions sector, Afore Bancomer continues to perform extremely well, leveraged on a stable labor
market. As a result of the good management of business activity, it closed the year with assets under management of €13,132m, up 12.1% year-on-year, and with a 4.4% growth in fund gathering. Both variables are key to achieving increased income
from fees and commissions (which rose 6.7% on 2010) and a net attributable profit of €76m. This latter figure is very positive (up 5.1% year-on-year), considering the current instability and volatility of the financial markets worldwide.
The commercial performance of the insurance business in 2011 was very positive. Of particular note were the
uptake on the ILP (Free Wealth Investment), the solid performance of the
Creditón Nómina loan
and HogarSeguro and VidaSegura Preferente insurance, and the progress of the AutoSeguro insurance, boosted by the campaign run in the early part of the year. The new Auto Alerta product is an outstanding example of technological innovation. It uses
GPS to report accidents by simply pressing a button on a mobile telephone. The low levels of claims in the car and life insurance branches have favorably contributed to earnings in 2011.
37
South
America
Income statement
(Million euros)
Units:
South America Banking business Pensions and Insurance
2011
D
%
D
% (1) 2010 2011
D
%
D
% (1) 2010 2011
D
%
D
% (1) 2010
Net interest income 3,164 26.8 31.6 2,495 3,103 26.4 31.2 2,455 61 50.2 53.2 41
Net fees and commissions 1,077 12.6 15.7 957 783 13.5 18.1 690 299 5.9 5.7 282
Net trading income 477 (7.2) (3.4) 514 442 16.1 20.7 381 35 (73.7) (72.5) 133
Other income/expenses (261) 55.3 65.9 (168) (405) 35.9 44.4 (298) 154 10.9 16.8 139
Gross income 4,457 17.4 21.4 3,797 3,924 21.5 26.0 3,229 549 (7.7) (5.6) 594
Operating costs (2,042) 22.4 27.1 (1,668) (1,770) 23.8 28.7 (1,430) (236) (2.0) 0.9 (241)
Personnel expenses (1,040) 21.9 26.4 (854) (894) 23.4 28.2 (725) (116) (4.4) (1.7) (122)
General and administrative expenses (844) 23.4 28.3 (684) (725) 24.8 30.0 (581) (112) (0.3) 2.8 (113)
Depreciation and amortization (158) 20.5 25.4 (131) (151) 20.9 25.9 (125) (7) 13.3 15.2 (7)
Operating income 2,415 13.4 17.0 2,129 2,155 19.8 23.8 1,799 313 (11.5) (9.9) 354
Impairment on financial assets (net) (449) 7.2 10.5 (419) (449) 7.2 10.5 (419) - - - -
Provisions (net) and other gains (losses) (89) 120.0 124.3 (40) (90) 269.9 278.9 (24) 1 n.m. n.m. (8)
Income before tax 1,877 12.4 16.0 1,670 1,616 19.2 23.3 1,356 314 (9.3) (7.7) 346
Income tax (390) (1.7) 2.3 (397) (346) 12.6 17.6 (307) (60) (31.4) (29.2) (88)
Net income 1,487 16.8 20.2 1,273 1,270 21.1 24.9 1,049 253 (1.8) (0.5) 258
Non-controlling interests (480) 25.3 29.4 (383) (422) 32.9 38.0 (317) (59) (12.8) (12.2) (67)
Net attributable profit 1,007 13.2 16.2 889 848 16.0 19.3 732 195 2.0 3.6 191
(1) At constant exchange rate.
Balance sheet
(Million euros)
Units:
South America Banking business Pensions and Insurance
31-12-11
D
%
D
% (1) 31-12-10 31-12-11
D
%
D
% (1) 31-12-10 31-12-11
D
%
D
% (1) 31-12-10
Cash and balances with central banks 8,335 18.0 13.9 7,064 8,335 18.0 13.9 7,064 0 72.2 76.2 0
Financial assets 8,912 4.2 5.7 8,550 7,393 10.8 11.9 6,671 1,474 (20.8) (18.7) 1,860
Loans and receivables 43,069 27.3 26.6 33,845 42,531 28.6 27.8 33,067 394 (30.0) (28.8) 563
Loans and advances to customers 38,831 27.7 27.1 30,408 38,759 28.2 27.6 30,228 85 (56.9) (55.9) 197
Loans and advances to credit institutions
and
other 4,238 23.3 22.9 3,437 3,772 32.9 31.0 2,839 309 (15.6) (14.4) 366
Tangible assets 805 23.5 22.2 652 755
26.6 24.6 596 50 (10.2) (5.3) 56
Other assets 2,322 48.9 50.9 1,559 1,848 35.3 37.5 1,366 182 7.8 11.8 168
Total assets/Liabilities and equity 63,444 22.8 22.1 51,671 60,863 24.8 23.9 48,764 2,100 (20.7) (18.7) 2,648
Deposits from central banks and credit
institutions 5,205 21.1 20.5 4,299 5,205 21.2 20.7 4,295 4 15.2 14.9 4
Deposits from customers 42,468 26.8 25.3 33,496 42,655 26.9 25.4 33,605 - - - -
Debt certificates 2,282 22.5 24.3 1,864 2,282 22.5 24.3 1,864 - - - -
Subordinated liabilities 1,568 17.8 19.2 1,331 1,125 (3.9) (2.6) 1,171 - - - -
Financial liabilities held for trading 1,006 14.8 21.9 876 1,006 14.8 22.0 876 - - - 1
Other liabilities 8,002 9.8 10.6 7,286 5,939 21.8 21.1 4,877 1,831 (16.2) (13.9) 2,186
Economic capital allocated 2,912 15.6 15.0 2,519 2,651 27.6 26.0 2,077 249 (43.7) (42.8) 442
(1) At constant exchange rate.
38
Business areas
The South
American area manages the Group’s banking, pension and insurance businesses in the region. The first half of 2011 saw the incorporation of Crédit Uruguay (purchased at the end of 2010 and merged with BBVA Uruguay in May 2011) and the
sale of the Group’s stake in the insurance company Consolidar Retiro of Argentina. An additional 24.5% stake in the company Forum Chile was also purchased in September 2011.
In the last quarter of the year, the South American economy continued to grow strongly, supported by resilient domestic
demand. Even so, turbulence in Europe and the U.S. has led to greater difficulties in the financial markets in the region, including increased market volatility and a reduction of capital inflows. However, many countries still have a considerable
buffer (sounder public finances and better macroeconomic management than in the past) and are in a good position to introduce stimulus policies to counteract weaker foreign demand. In general, a more negative external environment has shifted the
focus in emerging countries from overheating to downside risks and, increasingly, to the possible need for support policies. Thus, not only has the cycle of interest-rate rises been halted, but also some countries have actually begun to reduce rates
in an effort to stimulate growth.
In terms of exchange rates evolution, there were general gains in the
official exchange rates of the main currencies in the region during the quarter. In year-on-year terms, only the Argentinean and Chilean peso lost value. In average terms over the last 12 months all the currencies except for the Chilean peso have
weakened. Over the quarter, the variations are not significant. There were minor losses for the Chilean and Colombian peso and gains (also minor) in the remaining currencies. To sum up, the impact of exchange rates over the last year is positive for
the balance sheet but negative for earnings. Unless otherwise indicated,
South America highlights in the
fourth
quarter
Net interest income reflects the high rate of
growth in business activity.
Improved business in pensions and
insurance.
Stable growth forecasts for the region.
NPA ratio at an all-time low.
Significant ratios
(Percentage)
South America
31-12-11 30-09-11 31-12-10
Efficiency ratio 45.8
45.5 43.9
NPA ratio 2.2 2.3 2.5
NPA coverage ratio 146 140 130
Risk premium 1.31
1.31 1.52
all comments below refer to changes at constant
exchange rates.
Against this background, the area has maintained its growth levels in both business activity and earnings. The loan book at the end of December amounted to €40,219m, a year-on-year
increase of 27.0% and a gain of 10 basis points in market share over the last 12 months (November figures, the latest available). This increase in lending has been accompanied by a significant rise in customer deposits (up 25.7%), focused on
lower-cost transactional current and deposit accounts, which increased over the year by 32.0%.
Including the
assets under management by mutual funds, customer funds managed by the
South America. Operating income South
America. Net attributable profit
(Million euros at constant exchange rate) (Million euros at constant exchange
rate)
+17.0% (1) + 16.2% (1)
2,064 2,415 866 1,007
631 656 277
253 251
571 555 573 236 233 226
509 518 210
466 187
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2010 2011
(1) At current exchange rate: +13.4%. (1) At current exchange rate: +13.2%.
South America
39
banks
closed December at €48,624m, 23.3% up on the same date in 2010.
From the point of view of earnings, the
cumulative net interest income was €3,164m, 31.6% up on the figure for 2010. This reflects the significant growth in business and the good management of spreads, despite strong competitive pressure. Net income from fees and commissions was up
15.7% on the previous year to €1,077m. Net trading income (NTI) was down 3.4% year-on-year to €477m. It was strongly affected by the value of US dollar positions in Banco Provincial in Venezuela and by the turmoil on the markets. As a
result of the above, gross income stood at €4,457m, a rise of 21.4% on the figure for 2010.
Expenses in
the area were strongly influenced by the expansion and differentiation projects carried out in most of the units. As a result, they grew by 27.1% year-on-year to €2,042m, but the efficiency ratio stood at 45.8% thanks to the positive trend in
revenues. As a result, operating income was up 17.0% to €2,415m.
The last quarter of the year maintained
the same trend in terms of asset quality. The NPA ratio closed on 31-Dec-2011 at 2.2%, with yet again another reduction over the quarter of 10 basis points thanks to the rigorous policy of risk admission and the outstanding management of recoveries
policy. The coverage ratio improved considerably again this quarter to 146%. The increase in lending in the area explains the 10.5% year-on-year rise in impairment losses on financial assets to €449m.
In short, the excellent growth of revenues thanks to the boost provided by business combined with good price management
has enabled the Bank to continue with its investment effort in the area, increase loan-loss provisions due to the growing lending volumes and achieve a net attributable profit of €1,007m, a rise of 16.2% over the year.
Banking business
The area’s banking business generated a net attributable profit of €848m, 19.3% up on the figure for the previous year. The most significant aspects for each of the banks are
detailed below.
Banco Francés in Argentina closed the year with a significant growth in its market
share. Lending gained 15 basis points over the last 12 months, mainly thanks to progress in consumer finance (up 85 basis points) and corporate lending (up 84 basis points), while the share of customer funds was up 8 basis points (all with November
data, the latest available). This explains the year-on-year increase of 21.3% in net interest income. Growing net fees and commissions (29.1%) and NTI (83.3%)
led to a year-on-year increase in gross income of 28.3%. This, together with the increase in expenses (as a result of inflation and the expansion plans underway) and moderation in
loan-loss provisions, has led to a year-on-year increase of 32.9% in the net attributable profit to €135m.
In Chile, BBVA and Forum generated a net attributable profit of €114m. Particularly outstanding was net interest
income, which was up 30.1% thanks to significant growth of lending to private individuals, particularly in consumer finance, with a year-on-year gain of 104 basis points in market share, and mortgage lending, which was up 29 basis points (both
figures also to November).
Transactional customer funds also performed well, with an increase in market share
of 10% on the figure for 2010, according to the latest data to October. NTI fell back in year-on-year terms due to the high gains from the sale of securities in the portfolio in 2010, while expenses continue to rise due to the expansion plans
carried out over the year.
BBVA Colombia continues to improve its market share in the individual segment
thanks to significant growth in lending, particularly consumer finance (up 42.0% year-on-year) and credit cards (up 51.7%), where it gained 119 and 128 basis points in market share respectively from November 2010 to November 2011 (latest figures
available). As a result, the net interest income was up 10.7% in 2011, despite the strong competitive pressure, and gross income was up 6.7%, slightly down due to lower NTI resulting from the markets situation. The significant rise in lending
activity (up 22.9% year-on-year) did not prevent loan-loss provisions from falling year-on-year by 35.9%, improving risk indicators. The net attributable profit was €208m, a rise of 15.3% on the figure for 2010.
In Peru, Banco Continental continues to perform well in its business, with a rise of 14.2% in net interest income. It
gained 72 basis points year-on-year in market share in its loan book, boosted by credit cards (up 131 basis points) and corporate lending (up 100 basis points), and with customer funds up 93 basis points (all using November figures). There was also
a significant rise in revenues from fees and commissions (up 9.8%), leading to gross income of €743m (up 9.8%). The expansion plans carried out over the year have boosted this rise in business and led to higher expenses in the unit. As a
result, and combined with a slight fall in loan-loss provisions, the net attributable profit was up 7.7% to €141m.
In 2011, and for the eighth year in a row, BBVA Continental received the “Best Bank in Peru” award from Global Finance and the “Award for Excellence” from Euromoney.
The bank was also chosen as the best bank in the country and is considered among
40
Business areas
the five
best banks in the region in the ranking drawn up by América Economía. Finally, BBVA Banco Continental was given third place in the annual ranking of the most sustainable banks in Latin America by the consultancy Management &
Excellence and the magazine Latin Finance.
Finally, Banco Provincial has recorded notable growth in its net
attributable profit (up 77.5% year-on-year) to €192m, thanks to its progress in its revenue lines. Net interest income was up 60.5%, reflecting the boost from lending activity, mainly for individuals and companies. Credit cards gained 354 basis
points in market share over the last 12 months, consumer finance 192 basis points and corporate lending 203 basis points (according to figures for November). NTI was up 43.4%, as a result of the revaluation of US dollar positions upheld by the Bank
(a very similar effect occurred in 2010 following the devaluation of the bolivar). The high rate of inflation and expansion plans continue to weigh on expenses, while provisions include greater generic provisions.
In 2011, BBVA Provincial was once more chosen by Global Finance, Euromoney and Latin Finance as the “Best Bank in
Venezuela”, and by Global Finance as the “Best Internet Bank.” It was also in 10th place in the “Great Place to Work 2010” list and first among the companies in the financial sector.
Among the other banks, BBVA Panama had a net attributable profit of €26m, BBVA Paraguay of €23m, and BBVA
Uruguay of €9m (including the contribution from Crédit Uruguay).
Pensions and Insurance
The Pensions & Insurance business in South America contributed with a net attributable profit of
€195m in 2011, 3.6% up on the figure for 2010. Out of this total, €106m were generated by the pension-fund business (down 16.1%) and €89m by the insurance business (up 44.0%).
In 2011, the pension business was severely affected by the high level of volatility on financial markets, with the
resulting negative impact on NTI in the companies. However, the positive performance of commercial activity has led to an increase in fund subscriptions of 16.0% year-on-year and thus a positive effect on net fee income (up 6.9%). Funds under
management remained at practically the same levels as 2010, at €47,818m.
AFP Provida in Chile obtained a
net attributable profit for the year of €74m, 17.2% down on the figure for 2010. This can be explained by the worse figures for NTI, as recurrent revenues performed very favorably thanks to growth in subscriptions (up 4.7%). There was moderate
growth in expenses, 3.7% over the year. In Peru, AFP Horizonte generated earnings of €13m (down 16.4% year-on-year). The good management by the company has enabled it to improve its market indicators. In particular, there was a significant
increase in subscriptions (up 16.3%), it maintained its first place in share of pension savers and leadership in the returns on two of its three managed funds. The above has had a very positive effect on the firm’s fee income (up 20.4%).
Finally, AFP Horizonte Pensiones in Colombia had a net attributable profit of €21m and its managed funds increased by 12.9%, with the number of pension savers increasing by 8.4% and subscriptions by 25.6%.
The insurance business has had a very favorable year and continues to show notable strength. In 2011, the increased
activity and improved product catalog resulted in a year-on-year rise in the volume of written premiums by all the companies as a whole of 9.7%.
The Grupo Consolidar in Argentina had a net attributable profit of €23m, 6.8% up on the figure for 2010, while the insurance companies in Chile generated €33m, Seguros Provincial
in Venezuela €8m and the companies in Colombia €22m.
South America. Data per country (banking
business, pensions and insurance)
(Million euros)
Operating income Net attributable profit
D
% at constant
D
% at constant
Country 2011
D
% exchange rate 2010 2011
D
% exchange rate 2010
Argentina 315 5.1 14.7 299 157 18.9 29.7
132
Chile 454 6.0 5.4 429 224 0.7 0.2 223
Colombia 411 (3.4) (1.4) 425 251 12.6 14.9 223
Peru 518 0.6 2.9 515 154 2.8 5.2 149
Venezuela
670 67.9 78.5 399 201 63.0 73.3 123
Other countries(1) 48 (22.9) (25.0) 62 20 (48.6) (50.8) 39
Total 2,415 13.4 17.0 2,129 1,007 13.2 16.2 889
(1) Panama, Paraguay, Uruguay, Bolivia and Ecuador. Additionally, it includes eliminations and other charges.
South America
41
The United
States
Income statement
(Million euros)
Units:
The United States BBVA Compass
2011
D
%
D
% (1) 2010 2011
D
%
D
% (1) 2010
Net interest income 1,590 (11.4) (7.4) 1,794 1,400 (9.6)
(6.2) 1,566
Net fees and commissions 632 (2.9) 1.1 651 525 (4.0) 0.3 549
Net trading income 140 (10.6) (8.1) 156 94 (4.2) 0.0 98
Other income/expenses (85) 70.1 79.0 (50) (83) 72.8 89.9 (46)
Gross income 2,277 (10.7) (7.0) 2,551 1,936 (9.6) (6.3) 2,168
Operating costs (1,491) (1.7) 2.8 (1,517) (1,300) (3.5) 0.9 (1,352)
Personnel expenses (819) 8.8 13.6 (753) (715) 6.7 12.8 (665)
General and administrative expenses (502) (11.1) (7.1) (565) (420) (13.2) (10.5) (493)
Depreciation and amortization (170) (14.8) (10.6) (199) (165) (13.6) (10.9) (194)
Operating income 786 (24.0) (21.1) 1,034 636 (19.9) (18.2) 816
Impairment on financial assets (net) (346) (50.9) (48.7) (703) (332) (39.6) (41.2) (592)
Provisions (net) and other gains (losses) (1,501) n.m. n.m. (22) (1,480) n.m. n.m. (18)
Income before tax (1,061) n.m. n.m. 309 (1,175) n.m. n.m. 206
Income tax 339 n.m. n.m. (69) 362 n.m. n.m. (57)
Net income (722) n.m. n.m. 239 (814) n.m. n.m. 149
Non-controlling interests - - - - - - - -
Net attributable profit (722) n.m. n.m. 239 (814) n.m. n.m. 149
Net one-offs (2) (1,011) - - - (1,011) - - -
Net
attributable profit (excluding one-offs)(2) 289 20.8 23.2 239 197 29,4 39,3 149
(1) At constant exchange rate.
(2) In the fourth quarter of 2011 a charge was booked for goodwill impairment in the United States.
Balance sheet
(Million euros)
Units:
The United States BBVA Compass
31-12-11
D
%
D
% (1) 31-12-10 31-12-11
D
%
D
% (1) 31-12-10
Cash and balances with central banks 3,379 47.9 43.3
2,284 2,103 (2.8) (6.1) 2,170
Financial assets 8,375 12.1 8.6 7,470 7,486 11.5 9.2 6,638
Loans and receivables 40,647 2.3 (0.9) 39,729 33,228 6.3 3.6 31,046
Loans and advances to customers 38,927 1.4 (1.9) 38,408 32,118 5.3 2.6 30,326
Loans and advances to credit institutions
and other 1,720 30.2 26.1 1,321 1,110 48.8 49.3 720
Inter-area positions - - - 4,844 - - - 107
Tangible assets 833 4.7 1.4 795 794 4.4 1.6 757
Other assets 2,179 (11.2) 14.0 2,453 1,927 (9.4) (13.3) 2,152
Total assets/Liabilities and equity 55,413 (3.8) (6.8) 57,575 45,538 5.6 2.9 42,869
Deposits from central banks and credit
institutions 6,338 (5.3) (8.3) 6,690 4,112 24.0 22.7 3,246
Deposits from customers 37,777 (10.8) (13.6) 42,343 34,659 3.3 0.4 33,433
Debt certificates 363 (27.5) (29.8) 501 - - - -
Subordinated liabilities 1,211 6.1 2.7 1,141 963 9.4 6.9 873
Inter-area positions 2,466 - - - - - - -
Financial liabilities held for trading 454 26.1 22.1 360 440 51.2 51.9 280
Other liabilities 3,634 1.8 (1.4) 3,568 2,814 3.9 1.1 2,696
Economic capital allocated 3,170 6.7 3.3 2,972 2,549 8.0 5.4 2,341
(1) At constant exchange rate.
42
Business areas
This area
encompasses the Group’s business in the United States and in the Commonwealth of Puerto Rico. More precisely, it includes BBVA Compass, which accounted for 82% of the balance sheet in the area as of 31-Dec-2011. Due to its relative
contribution, most of the comments below refer to this business unit. The area also covers the assets and liabilities of the BBVA office in New York, which specializes in transactions with large corporations.
The economic recovery in the United States slowed considerably at the start of 2011. This was largely due to a combination
of temporary factors, including the upturn in oil prices and the longer than expected interruption in supply as a result of the earthquake in Japan. In addition, growing domestic and foreign fiscal uncertainty has contributed to slower quarterly
growth in 2011 compared to 2010. The slight upturn in economic growth in the second half of the year was not enough to boost significantly the expectations of business and consumers. Household deleveraging, global fiscal uncertainty, sluggish
residential investment, and restrictions in credit conditions all continue to limit economic growth.
Interventions by the Federal Reserve have flattened the yield curve, and interest rates outlook continues to be low over
the coming years. Concerns continue to focus on lowering the unemployment rate and improving the real-estate market, while at the same time maintaining in inflationary expectations under control. High energy and food prices are putting pressure on
inflation. However, the major domestic economic stagnation and the slowdown of the global economy have preserved core prices within the Fed’s implicit target range.
The United States highlights in the
fourth
quarter
Business plan up to speed and progress in
building the franchise.
Resilient net interest income despite
unfavorable
interest rate curve.
Growth in target portfolios more than
compensate the fall in construction real-estate
lending.
Continued improvement in risk
indicators.
Significant ratios
(Percentage)
The United States
31-12-11 30-09-11 31-12-10
Efficiency ratio 65.5 64.2 59.5
NPA ratio 3.6 3.9
4.4
NPA coverage ratio 73 69 61
Risk premium 0.93 1.04 1.69
The dollar’s
exchange rate (fixing rate) against the euro appreciated in year-on-year and quarter-on-quarter terms, while the average
rates have depreciated over the last 12 months by 4.7%. In contrast, the currency appreciated slightly in average rates over the quarter (up 1.1%). This means that the impact of the
currency is positive on the balance sheet and business activity (both over the quarter and for the year as a whole), but negative on earnings over the last 12 months, although slightly positive in quarterly terms. Unless otherwise indicated, all
comments below refer to changes at a constant exchange rate.
The United States. Operating income
(Million euros at constant exchange rate)
The United States. Net attributable profit excluding one-offs (Million euros at constant exchange rate)
-21.1% (1) +23.2% (1)
996 786 235 289
276
255 263
228
203 208
186
164
82 81 81
57 74 66 68
15
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2010 2011 2010 2011
(1) At current exchange rate:
-24.0%. (1) At current exchange rate: +20.8%.
43
The United States
Below is a
summary of the most relevant events in this area in the fourth quarter of 2011.
The United States franchise
continues to show a resilient quarterly net interest income at constant exchange rate (€393m, down 1.5% on the figure for the previous quarter). This is very significant, taking into account the gradual shift in composition of the loan
portfolio toward lower-risk products with narrower spreads. This resilience is the result of good management of customer spread. Net interest income for the year amounted to €1,590m, 7.4% down on the figure for 2010. Annual income from fees and
commissions was up 1.1% year-on-year to €632m, despite the entry into force of regulations limiting them. All the above, together with lower NTI (down 8.1% year-on-year) caused by the turmoil on the markets, and a greater contribution to the
Federal Deposit Insurance Corporation (FDIC), brought gross income in 2011 to €2,277m (down 7.0 year-on-year).
Operating expenses in the area continue in check, despite the investment made in both people and technology. They increase by only 2.8% on the 2010 figure to €1,491m. The result was
an operating income of €786m, down 21.1% over the year.
The gradual improvement in the loan-book mix,
with an additional increase in the weight of target portfolios (residential real estate and commercial) has had a clear impact on asset quality in the area, with NPA and coverage ratios which continue to improve their levels on the figures for the
previous quarter, and the risk premium also falling significantly. The NPA ratio fell by 27 basis points on the figure of 30-Sep-2011, and closed 31-Dec-2011 at 3.6%. The coverage ratio was 73% (69% at the end of September 2011). The cumulative risk
premium in 2011 fell once more in the last three months by 11 basis points to 0.93%, while impairment losses on financial assets for the year fell 48.7% on the 2010 figure to €346m.
The value of goodwill in the United States was adjusted in 2011 by €1,011m net of taxes. Despite the positive
performance of the franchise in 2011, the slower-than-expected economic recovery, a low interest rate outlook and growing regulatory pressure, all imply a slowdown in expected earnings growth in this area. This goodwill adjustment is of an
accounting nature only and does not
have any negative impact on the liquidity or capital adequacy of either
the area or the Group.
To sum up, the resilience of recurring revenue, tight control of expenses and lower
loan-loss provisions explain the net attributable profit for 2011 of €289m (excluding the goodwill impairment), 23.2% up on the figure for 2010. Including the effect of the goodwill adjustment, the figure was a loss of €722m.
BBVA Compass Banking Group
The BBVA Compass banking group (BBVA Compass) basically includes retail, commercial and corporate banking and wealth management businesses in the United States, excluding Puerto Rico.
Gross customer lending in this unit was €33,065m as of 31-Dec-2011, a year-on-year rise of 2.4%, and 1.0%
for the quarter. BBVA Compass continues to reduce its highest-risk portfolios and increase its exposure to the target segments. Thus lending to the residential real-estate sector, which now amounts to 24.4% of the total, increased by 24.0% over the
year and 4.6% over the last quarter. Loans to the commercial and industrial sector, which account for 34.8% of the total, were up 22.9% year-on-year and 6.2% quarter-on-quarter. In contrast, finance for construction real estate reduced its weight to
8.1%, with a fall over the year of 32.3% (down 13.2% over the quarter). This shift toward the commercial and industrial sector and residential real estate contributes to diversify the unit’s loan portfolio more evenly.
Customer funds remained stable in year-on-year terms and amounted to €33,862m. The performance of non interest
bearing deposits (current and savings accounts) was particularly positive, with an increase over the same period of 6.2%. This had a positive impact on the cost of deposits in the area.
From the results point of view, recurring revenue (net interest income plus income from fees and commissions) was
resilient thanks to the adequate management of customer spreads and the success of actions taken to mitigate the effects of regulatory changes approved towards the end of 2011. It is important to
BBVA Compass. Loan mix BBVA Compass. Deposit mix
(Percentage)(Percentage)
December
2010 December 2011 December 2010 December 2011
Construction real estate 12.6
Commercial estate 29.7
Residential real estate 20.8
Consumer 16.3
Commercial real estate 20.6
Commercial 34.8
Consumer 14.5
Construction real estate 8.1
Commercial real estate 18.2
Residential real
estate 24.4
Non interest bearing accounts 25.9
Time deposits 26.4
Average cost of deposits 0.65
Interest bearing
accounts 477
Time deposits 21.5
Non interest bearing accounts 29.0
Average cost
of deposits 0.36
Interest bearing accounts 49.5
Business areas
44
stress
that BBVA Compass maintained its profitability over the year in terms of net interest income over ATA, and at higher levels than its competitors. Fees and commissions closed 2011 at practically the same level as 2010, €525m (up 0.3%). This was
achieved despite new regulation enforcing cuts. The above, combined with stable NTI and a greater contribution to the FDIC, resulted in a year-on-year fall of 6.3% in gross income to €1,936m.
Operating expenses increased modestly over the year by 0.9% to €1,300m, despite the ongoing investment plans in
people and technology. As a result, the operating income amounted to €636m (down 18.2% year-on-year).
The
most significant aspect in the year was once more the improvement in asset quality, which is an essential factor in the profitability of BBVA Compass. Moreover, impairment losses on financial assets fell back significantly to €332m (a
year-on-year fall of 41.2%).
As a result, the unit contributed a net attributable profit, excluding the effect
of the goodwill impairment, of €197m, up 39.3%. Taking into consideration the accounting impact on earnings of the goodwill impairment, the result was a negative €814m.
BBVA Compass continues to have sound solvency indicators, as shown by the level of its Tier 1 common ratio as of
31-Dec-2011 of 11.3% (according to local accounting criteria).
BBVA Compass has achieved a number of
milestones in 2011, and made significant progress in other initiatives, including the following:
Continued
consolidation of the BBVA franchise in the country.
Progress continues to be made on improving the IT
platform, developed as planned. The branch platform project, which includes a new teller system, in-branch CRM, checks image capture and marketing campaign management tools, has been completed. Moreover, the core banking platform development is at
full speed and includes benefits such as customer-centric architecture and real time processing, both contributing to improve the bank’s efficiency. Likewise, the implementation of the Commercial lending origination platform is on track and it
will improve the risk admission process. BBVA has also been working to improve the on-line banking platform. Indeed, BBVA has obtained recognition from US Banker and Bank Technology News for its technological achievements so far and its vision of
the future in this field.
An important effort has been made to create brand awareness in the U.S. Thus, BBVA
was named retail bank of the year in 2011. The bank also reaped great rewards from its relationship with the National Basketball Association (NBA), which includes collaboration with four NBA teams, as well as with two WNBA
Developer loans over BBVA Compass total loan portfolio
(Percentage)
20.7
12.6
8.1
December December December
2009 2010 2011
teams, all of them in key markets for the bank. In addition, in the fourth quarter of 2011 BBVA Compass and
the Houston Dynamo announced a multi-year agreement for the rights to the name of the new Major League Soccer (MLS) team stadium in the center of Houston, which is currently under construction. It is also worth noting that BBVA uses its relationship
with the NBA to provide services for the community. An example is that over 700 employees and participants worked as volunteers last year on the Team Works project for schools reconstruction.
The bank’s customer-centric business model strategy has made progress in building up the loyalty of the customer base
and launching innovative products and services. Customer retention and cross-selling ratios are showing good trends backed by sound mortgage activity that is growing above the industry, while improving customer satisfaction and production levels.
In 2011, Corporate and Commercial Banking units are successfully expanding to new specialized industrial
segments including public finance and healthcare, in order to build a more sound and diversified revenue base.
From the point of view of distribution, greater emphasis has been placed on developing alternative banking distribution
channels. As a result, BBVA has significantly increased the number of mobile banking users.
There have also
been improvements in infrastructure, processes and risk procedures of the bank.
Finally, BBVA’s presence
in the United States has been expanded through the selective search for new talent and the retention of current employees, all with the aim of making BBVA Compass the best place to work. In response to employee requests, the Best Place to Work
Journey program was launched, with a focus on four main areas: Leadership and Management Alignment; Cooperation and Collaboration; Career Growth & Development; and the Work-Life Balance.
45
The United States
Corporate
Activities
Income statement
(Million euros)
Corporate Activities
2011
D
% 2010
Net interest income (621) n.m. 121
Net fees and commissions (202) (4.4) (211)
Net
trading income 437 (37.2) 696
Other income/expenses 359 10.0 326
Gross income (27) n.m. 932
Operating costs (960) 24.1 (774)
Personnel
expenses (543) 18.2 (460)
General and administrative expenses (148) 75.8 (84)
Depreciation and amortization (269) 17.1 (229)
Operating income (987) n.m. 158
Impairment on
financial assets (net) (392) (59.2) (961)
Provisions (net) and other gains (losses) (1,050) 20.7 (870)
Income before tax (2,430) 45.2 (1,673)
Income tax 1,015 69.0 600
Net income (1,415) 31.9 (1,073)
Non-controlling
interests 2 n.m. 0
Net attributable profit (1,413) 31.8 (1,072)
Balance sheet
(Million euros)
Corporate Activities
31-12-11
D
% 31-12-10
Cash and balances with central banks (977) n.m. (89)
Financial assets 24,495 (7.1) 26,374
Loans and receivables (4,370) 44.8 (3,017)
Loans
and advances to customers (4,065) 126.4 (1,796)
Loans and advances to credit institutions and other (304)
(75.1) (1,221)
Inter-area positions (66) (99.6) (16,923)
Tangible assets 3,180 5.2 3,023
Other assets 18,976 23.6 15,356
Total
assets/liabilities and equity 41,239 66.8 24,724
Deposits from central banks and credit institutions 10,117
n.m. 49
Deposits from customers 29,230 97.0 14,834
Debt certificates 70,910 (10.2) 78,954
Subordinated liabilities 2,336 (60.4) 5,904
Inter-area positions (71,885) (8.6) (78,629)
Financial liabilities held for trading (4,347) 14.4 (3,801)
Other liabilities (6,312) 160.4 (2,424)
Valuation
adjustments (2,787) 262.0 (770)
Shareholders’ funds 39,064 17.8 33,150
Economic capital allocated (25,087) 14.5 (21,910)
46
Business areas
This area
includes all those activities not included in the business areas. These are basically the costs of the headquarters with strictly corporate functions, certain allocations to provisions such as early retirements and others of a corporate nature. The
area also includes the assets and liabilities derived from the management of structural liquidity, interest-rate and exchange-rate risks by the Assets and Liabilities Management unit, as well as their impact on earnings that are not recognized in
the business areas via transfer pricing. Finally, it includes portfolios and assets, together with their results, whose management is not linked to customer relations, such as Holdings in Industrial and Financial Companies and Real Estate
Management.
In 2011, gross income was a negative €27m, compared with a positive €932m in 2010. This
evolution is mainly due to two factors: first, a lower net interest income, basically due to the increased cost of wholesale funding; and second, NTI below that of last year as a result of the lack of earnings from portfolio sales and the loss of
asset value caused by the turbulent market situation. Other income/expenses basically includes the dividend from Telefonica. Operating expenses amounted to €960m, as a result of investments made at corporate level, mainly in staff training,
technology, brand and infrastructures. As a result, the operating income was a negative €987m (+€158m in the same period last year).
Impairment losses on financial assets totaled €392m and their evolution is parallel to changes in NTI, in other words additional provisions are made according to the level of NTI
revenue. Furthermore, the increase in provisions (net) and other gains/losses stood at a negative €1,050m, which is due primarily to greater provisions for real estate and foreclosed assets. As a result, the accumulated net attributable profit
for 2011 was -€1,413m (-€1,072m in 2010).
Asset/Liability Management
The Assets and Liabilities Management unit is responsible for actively managing structural interest-rate and
foreign-exchange positions, as well as the Group’s overall liquidity and shareholders’ funds.
Liquidity management helps to finance the recurrent growth of the banking business at suitable maturities and costs, using
a wide range of instruments that provide access to a large number of alternative sources of finance.
A core
principle in the BBVA Group’s liquidity management continues to be to encourage the financial independence of its subsidiaries in the Americas. This aims to ensure that the cost of liquidity is correctly reflected in price formation and that
there is sustainable growth in the lending business. Short-term and long-term wholesale financial markets were affected by heightened uncertainty in the fourth quarter of 2011. The long-term markets remained practically closed to the European
financial sector. BBVA was one of the few European banks with access to the market, as demonstrated by the successful issue during the quarter of €750m BBVA senior debt maturing in 18 months. Short-term markets have been affected by the lack of
investor appetite due to the uncertainties regarding the sustainability of European finances. Against this background, the European Central Bank decided at its meeting on December 8 to take exceptional measures to extend the liquidity in the
European financial system. These measures included two 36-month liquidity auctions, reducing the reserve ratio from 2% to 1%, and widening collateral eligibility. BBVA used the extraordinary 36-month auction on December 21 to obtain an amount
equivalent to its wholesale debt redemptions in 2012. This proves the Bank’s prudence in liquidity risk management, in line with the debt maturity profile for the coming years, with an average of €12,000m per year. This amount can be
comfortably met in a scenario of low lending activity in Spain and growth of customer deposits. To sum up, BBVA’s proactive policy in its liquidity management, its retail business model and a smaller volume of assets give it a comparative
advantage compared to its European peers. Moreover, the increased proportion of retail deposits on the liability side of the balance sheet in all the geographical areas continues to allow the Group to strengthen its liquidity position and to improve
its financing structure.
The Group’s capital management has a twofold aim: to maintain the levels of
capitalization appropriate to the business targets in all the countries in which it operates; and, at the same time, to maximize the return on shareholders’ funds through the efficient allocation of capital to different units, good management
of the balance sheet and proportionate use of the various instruments that comprise the Group’s equity: common stock, preferred shares and subordinated debt. In 2011, BBVA’s Annual General Meeting approved the introduction of a
“Dividend Option” program to offer shareholders a wider range of remuneration on their capital. In addition, in July 2011 the Board of Directors approved the total conversion of
47
Corporate Activities
the
mandatory convertible subordinated bonds issued in September 2009 (worth €2,000m) into newly issued BBVA ordinary shares. Besides, in December 2011, the conversion of preferred shares for mandatory convertible bonds was concluded successfully.
These bonds comply with the EBA requirements for their eligibility as highest-quality capital. The final amount was €3,430m, following subscription of 98.7% of preferred shares holders. In conclusion, the current levels of capitalization ensure
the Bank’s compliance with all of its capital objectives.
Foreign-exchange risk management of BBVA’s
long-term investments, basically stemming from its franchises in the Americas, aims to preserve the Group’s capital ratios and ensure the stability of its income statement. In 2011, BBVA maintained a policy of actively hedging its investments
in Mexico, Chile, Peru and the dollar area, with aggregate hedging of close to 50%. In addition to this corporate-level hedging, dollar positions are held at a local level by some of the subsidiary banks. The foreign-exchange risk of the earnings
expected in the Americas for 2011 is also strictly managed. In 2011, hedging mitigated the negative impact of exchange rates on the capital and the Group’s income statement. For 2012, the same prudent and proactive policy will be pursued in
managing the Group’s foreign-exchange risk from the standpoint of its effect on capital ratios and on the income statement.
The unit also actively manages the structural interest-rate exposure on the Group’s balance sheet. This aims to maintain a steady growth in net interest income in the short and medium
term, regardless of interest-rate fluctuations. In 2011, the results of this management have been very satisfactory, with extremely limited risk strategies in Europe, the United States and Mexico. These strategies are managed both with hedging
derivatives (caps, floors, swaps, FRAs) and with balance-sheet instruments (mainly government bonds with the highest credit and liquidity ratings).
Holdings in Industrial and Financial Companies
This unit manages the portfolio of industrial and financial investments in companies operating in the telecommunications,
media, electricity, oil, gas and financial sectors. Like Asset/Liability Management, this unit lies within the Group’s Finance Division.
BBVA applies strict requirements to this portfolio regarding risk-control procedures, economic capital consumption and return on investment, diversifying investments across different
sectors. It also applies dynamic hedging and monetization management strategies to its holdings. In 2011 it invested €642m and divested €231m.
As of 31-Dec-2011, the market value of the Holdings in Industrial & Financial Companies portfolio was €3,617m.
48
Business areas
Other
information:
Wholesale Banking & Asset Management
Income statement
(Million euros)
Wholesale Banking & Asset
Management
2011
D
%
D
% (1) 2010
Net interest income 1,575 (0.2) 1.1 1,579
Net fees and commissions 829 (0.4) 0.7 832
Net trading income 238 (19.7) (16.8) 297
Other
income/expenses 81 (36.0) (37.1) 127
Gross income 2,724 (3.9) (2.6) 2,835
Operating costs (948) 15.6 16.5 (821)
Personnel expenses (559) 11.0 11.7 (504)
General
and administrative expenses (375) 23.2 24.5 (305)
Depreciation and amortization (14) 14.8 15.3 (12)
Operating income 1,776 (11.8) (10.4) 2,014
Impairment on financial assets (net) (90) (55.8) (55.7) (204)
Provisions (net) and other gains (losses) (13) n.m. n.m. 4
Income before tax 1,673 (7.8) (6.2) 1,815
Income tax (465) (4.0) (1.8) (484)
Net income
1,209 (9.2) (7.8) 1,331
Non-controlling interests (87) (18.7) (15.6) (107)
Net attributable profit 1,122 (8.3) (7.1) 1,224
(1) At constant exchange rate.
Balance sheet
(Million euros)
Wholesale Banking & Asset Management
31-12-11
D
%
D
% (1) 31-12-10
Cash and balances with central banks 13,190 256.5 252.2 3,700
Financial assets 74,769 13.9 15.4 65,637
Loans and receivables 69,557 4.7 5.4 66,430
Loans
and advances to customers 57,936 8.2 9.1 53,539
Loans and advances to credit institutions and other 11,621
(9.9) (9.8) 12,891
Inter-area positions - - - 19,547
Tangible assets 49 9.1 9.0 45
Other assets 2,770 64.3 62.5 1,685
Total
assets/liabilities and equity 160,335 2.1 2.7 157,044
Deposits from central banks and credit institutions
56,163 24.7 26.4 45,029
Deposits from customers 41,387 (36.6) (36.4) 65,300
Debt certificates (70) - - -
Subordinated liabilities 1,736 (4.0) (4.3) 1,807
Inter-area positions 425 - - -
Financial liabilities held for trading 49,428 38.4 38.6 35,703
Other liabilities 6,794 14.6 15.1 5,930
Economic
capital allocated 4,472 36.5 36.0 3,276
(1) At constant exchange rate.
Other information Wholesale Banking & Asset Management
49
WB&AM
highlights in the fourth quarter
Sligh recovery in markets and business activity.
First collaboration with Garanti in the biggest venture capital deal in Turkish history.
High asset quality.
The Wholesale Banking & Asset Management (WB&AM) area handles the Group’s wholesale businesses and asset management in all the geographical areas where it operates. It is
organized into three main business units: Corporate and Investment Banking, Global Markets and Asset Management.
In a particularly difficult environment in 2011, when most of the European banks announced significant deleveraging plans
and there was a notable reduction in activity in wholesale business, BBVA managed to recover competitiveness. This is due to the Group’s superior business model based on customer relations which produces high quality recurrent earnings, as well
as reduced leverage. Gross income for the year to December was negatively affected by trading results and went down 3.9% on 2010 to €2,724m. By geographical areas, there was significant growth in Asia, at 6.4% year-on-year, and Europe
(excluding Spain), which was up 3.3%.
Operating expenses ended the year 15.6% up on the previous year, mainly
due to investment plans in IT systems and the various growth plans implemented in the different geographical areas.
As a result, the operating income was €1,776m, 11.8% down on the figure for the previous year.
The different business units in this area continue to show high asset quality, and thus, a low NPA ratio, a high coverage ratio and loan-loss provisions that represent 5.1% of operating
income. The net attributable profit for the year was €1,122m, down 8.3% on the figure for 2010.
The
Corporate and Investment Banking unit of WB&AM, managed gross lending to customers of €48,655m as of 31-Dec-2011, practically the same figure as at the end of the previous quarter. The volume of customer funds is also at the same level as
at the close of 30-Sep-2011, at €23,485m. This means that the liquidity gap has been stable over the quarter. Adding these figures to the balances in Global Markets, which were significantly affected by developments in financial markets over
2011, WB&AM ended the year with a loan book of €58,618m and customer funds of €39,644m.
The main
transactions in the Group’s wholesale business in the fourth quarter of 2011 are summarized below:
In
equity capital markets the Group participated in the issue of convertible bonds by Technip, the capital increase by Grupo de Inversiones Suramericana in Colombia and the capital increase of Galp’s subsidiary in Brazil.
In corporate finance, BBVA once more closed the year as market leader in Spain in M&A, with 16 deals announced in 2011
with a clear cross-border focus (10 deals), and as advisor of choice in the American continent (5 deals). BBVA has been recognized as Best M&A Advisor in Iberia in 2011 by Financial Times - Mergermarket.
WB&AM. Operating income
(Million euros at constant exchange rate)
-10.4%
(1)
1,983 1,776
629 455 427 471 557 441 374 404
1Q 2Q 3Q 4Q 1Q 2Q
3Q 4Q
2010 2011
(1) At current exchange rate: – 11.8%.
WB&AM. Net attributable profit
(Million euros at constant exchange rate)
-7.1%
(1)
1,207 1,122
413 295 270 229 349 313 199 261
1Q 2Q 3Q 4Q 1Q 2Q
3Q 4Q
2010 2011
(1) At current exchange rate: – 8.3%.
50
Business areas
Among the
highlights in the quarter was the sale of Inima to GS Engineering & Construction which was the biggest deal by a Korean company ever in Spain.
In project finance in Spain, BBVA led the financing of a hydrocarbon storage terminal in the Port of Barcelona for Tradebe and a wind farm for Ortiz. In Italy a photovoltaic project was
concluded with 9REN, and in the United Kingdom BBVA has structured the finance of the Tram in Nottingham. Highlights in the Americas include the financing of Transportadora de Gas del Perú, S.A. and Transmisora Eléctrica del Sur, S.A.,
as well as a mandate to provide financial consulting for the Aguas de Lima Sur desalination plant, a mandate to finance the gas pipeline in Chihuahua (Mexico), and the financing of a portfolio of wind farms for Edison Mission (United States). As
recognition for the project finance activity of its franchise in the United States, BBVA obtained the “Best Finance House in Renewables 2011” award from Environmental Magazine.
Structured trade finance includes the finance of the extension of the most important refinery in Turkey, with the backing
of Cesce. This is the biggest venture capital operation in the history of the country with an investment of USD €3,000m and the collaboration of Garanti. BBVA was awarded with the GTR prize for “Best Trade Finance Bank in Latin America
2011” for the third consecutive year.
Corporate lending activity included financial guarantees backing
European Investment Bank finance for its customers. BBVA is still the market leader in Latin American countries in this activity, as it was involved in the most important deals of the year.
In the area of global transactional banking, a performance bond was issued for a railroad macro-project under the
Bosphorus Strait. BBVA has been named the “Best Supplier of Cash Management Services” for companies and public institutions in Colombia by Euromoney, and the “Best Internet Bank” in the category of corporate and institutional
banking in Puerto Rico by Global Finance. It has also received the “Recommended” category in the Agent Banks survey for Major Markets by Global Custodian and “Top Rated” in the Sub-Custody Survey by Global Investor. Also worth
mentioning is its award as Best Trade Finance Bank in Latin America from Global Trade Review, which reflects the opinions of customers in relation to its Transactional Trade Finance services, and first prize in the World’s Best Trade Finance
Banks 2012 for BBVA in Spain from the magazine Global Finance.
Despite the uncertainty in 2011, the
Group’s customers still support the products and services of Global Markets, which continue to receive acknowledgements from specialized publications. In its 2011 survey, FX Week considers BBVA the fourth most recognized bank among customers,
the second most recognized by corporate customers and the fourth among investors in Latin American currencies. BBVA also appears for the first time in FX Week’s ranking of banks at a global level, in 26th place.
In 2011, the results of Global Markets in Spain were affected by limited economic activity and market uncertainty. Despite
these, revenue from customers has grown, particularly in strategic businesses such as credit, where income increased by 38% on the previous year. By type of customer (institutional investor, corporates, global public finance, SMEs and retail) there
was a notable positive development in global public finance, with revenue up 22% respectively on 2010 figures. Trading activity was affected by high market volatility, the sovereign debt crisis in a number of euro zone countries, and uncertainty
associated with regulatory changes. Despite these, BBVA improved its results on 2010 in equity, exchange rate and interest rate products. In Spain, BBVA consolidated its leading position as equity brokerage, with a market share of 16.1% at the end
of 2011, 6.9 percentage points above its nearest competitor.
In the rest of Europe and Asia, customer revenue
also increased 25% over the last 12 months thanks to the good performance of practically all the products. The biggest revenue still comes from interest rate (up 37%) and equity (up 26%) products.
In Global Markets Mexico, revenue from customers has continued the excellent trend begun some months earlier, with a rise
of 24% in year-on-year terms as a result of a positive performance in practically all the products. By type of customer, there was a notable increase in revenue from corporates. In contrast, trading income in 2011 was affected by the turmoil in the
markets. Despite this, revenue from exchange rate products was positive (up 23%).
In South America, Global
Markets customer revenue grew 7% year-on-year. By product, the biggest increases were in exchange rate (up 33% year-on-year).
In Global Markets United States, the outstanding performers were interest-rate and credit products. By type of customer, there was an increase in corporates, SME’s and retail.
Finally, Asset Management with global assets under management of €72,998m, continues to be a key player
in mutual fund and pension fund management in the geographical areas in which it operates. In Spain it has a market share of 15.2% of assets under management in mutual funds and is still the clear leader in pension fund management. In Mexico it
maintains its leading position in the management of mutual funds, with a market share of 22.8%, and in the rest of Latin American countries it has continued to grow in line with previous quarters, with a year-on-year increase in assets of 12.5% as
of 31-Dec-2011.
Other information: Wholesale Banking & Asset Management
51
INVESTOR
RELATIONS
Paseo de la Castellana, 81 - 17th Floor E-28046 Madrid - Spain Tel.: +34 91 374 62 01 Fax: +34 91
537 85 12 Email: inversoresbbva@grupobbva.com
1345 Av. of the Americas, 45th Floor New York, NY 10105 - USA
Tel.: (+1 212) 728 16 60 Fax: (+1 212) 333 29 05 Email: ricardo.marine@bbvany.com
http://accionistaseinversores.bbva.com
BBVA
INCLUDED IN
Dow Jones MSCI ETHIBEL
Sustainability Indexes
Member 2010/11 Indeces ADVANCED SUSTAINABLE PERFORMANCE INDICES INDICES
EXCELLENCE EUROPE & GLOBAL
4Q11
Adelante.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Bilbao Vizcaya Argentaria, S.A.
|
|
|
|
|
|
|
Date: February 3, 2012
|
|
|
|
By:
|
|
/s/ Eduardo Ávila Zaragoza
|
|
|
|
|
|
Name:
|
|
Eduardo Ávila Zaragoza
|
|
|
|
|
|
Title:
|
|
Chief Accounting Officer
|
BBVA Bilbao Vizcaya Arge... (NYSE:BBVA)
Historical Stock Chart
From Apr 2024 to May 2024
BBVA Bilbao Vizcaya Arge... (NYSE:BBVA)
Historical Stock Chart
From May 2023 to May 2024
